Private ruling: Deduction - work-related expenses
Date of advice: 9 August 2016
Published: September 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to claim a deduction for travel, accommodation and meal expenses incurred as a result of your employment? | A1: No.

Relevant facts and circumstances: You live in a City A and work as an Earthmoving Labourer in City B. You worked away from home in City B. You worked 11 days on and 4 days off. Whilst working away from home in City B you rented a caravan. You flew home on your days off and then flew back to your place of employment in order for you to start work. As a result you have incurred expenses in regards to travel, accommodation and meals. Your employer has paid you an allowance for air-fares and meals.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision: Summary: You are not entitled to a deduction for the costs associated with travelling between home and work, accommodation and meal expenses as it is considered a private expense. | Detailed Reasoning - Detailed reasoning: Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. A deduction is generally not allowable for the cost of travel by an employee between home and their normal workplace as it is considered to be a private expense. The cost of travel between home and work is generally incurred to put the employee in a position to perform duties of employment, rather than in the performance of those duties: Taxation Ruling TR 95/34. Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example unless one arrives at work it is not possible to derive income. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income. Rather, the expenses are incurred to enable the taxpayer to commence income earning activities (Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166). The essential character of travel between home and work is that of a private and domestic nature, related to personal and living expenses as part of the taxpayer's choice of where to live, in choosing to live away from and at what distance from work. As a general rule, expenditure on meals and accommodation while working away from home is not allowed as a deduction. These costs are essentially 'living expenses' of a private or domestic nature. The fact that income cannot be earned unless certain expenses are necessarily incurred is not determinative of deductibility. The costs of maintaining a second home in a place the taxpayer regularly visits on business are unlikely to be deductible. In FC of T v. Toms 89 ATC 4373;(1989) 20 ATR 466 the Federal Court disallowed a forest worker's deduction for the cost of maintaining a caravan and other living expenses. The taxpayer incurred the expenses in providing temporary accommodation at the base camp because the taxpayer had chosen to reside at a place far from the worksite. These expenses were dictated not by work but by private considerations. In this case, the taxpayer's meals, accommodation (running and depreciation expenses associated with the caravan, plus interest paid on the loan used to acquire the caravan) and incidental expenses do not have a sufficient connection with their income producing activities. The extra expenses of food and accommodation are considered to be of a private and domestic nature as the taxpayer chooses the location of their normal place of residence. Application to your circumstances In your case, the expenses you have incurred in relation to travel, accommodation, meals and incidentals are not considered to be incurred in the course of undertaking your income earning activities. Rather the expenses are incurred by you in putting yourself in a position where you can commence performing your duties, rather than in the performance of those duties. Therefore you are not entitled to a deduction for the travel, accommodation, meal and incidental expenses you incur as they are considered private in nature. The fact that you receive a travel allowance does not give you an entitlement to claim expenses in relation to the travel you undertake in order to reach your place of employment. You are not considered to be travelling in the performance of your duties from the moment you leave your home.