Private ruling: rental allowance
Published: December 2011
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you entitled to a deduction for rental expenses incurred due to relocating for work? | A1: No.

Relevant facts and circumstances: You relocated to a remote area due to work commitments. You received a rental allowance as part of your remuneration from your employer. The allowance was received as a condition of your relocation. You incurred expenditure for rent while working in the remote area. You did not maintain another residence during this time. The sole purpose of moving was to take advantage of the short-term work that was available in the remote area.

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

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except to the extent that they are outgoings of a capital, private or domestic nature. 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 receipt of an allowance does not mean that a taxpayer is automatically entitled to claim a deduction. The test of deductibility must still be met. (See paragraph 42 of Taxation Ruling TR 95/22) To be deductible, the expense must have the essential character of an outgoing incurred in gaining assessable income, or in other words, of an income-producing expense ( Lunney v. FC of T; Hayley v. FC of T (1958) 100 CLR 478; 11 ATD 404). In addition there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income ( Ronpibon Tin NL v. FC of T (1949) 78 CLR 47; 8 ATD 431). In your case, you have established a residence in the remote area to reside closer to your work location for the duration of your work commitments. The expenses associated with the property are considered to be private or domestic in nature. Therefore, a deduction is not allowable for your rented accommodation expenses under section 8-1 of the ITAA 1997.

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