Private ruling: Travel expenses
Date of advice: 23 June 2015
Published: June 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled a deduction for taxi fares between your home in City A and the airport? | A1: Yes | Q2: Are you entitled a deduction for car expenses between your home in City A and City B? | A2: No

Relevant facts and circumstances: You and your spouse have a residence in City A. In 20XX you were offered a position in City B. You have obtained rental accommodation in City B as well as maintaining your City A residence. Because of your work you reside in City B Monday to Friday and weekends on occasion's. You are required to travel both overseas and interstate on behalf of your employer. A typical overseas trip to work involves the use of your private vehicle as follows: • Sunday drive in your car from the employer to City A in order to catch an early morning flight the next morning. • Spend the night at your City A residence and early the next morning catch a taxi to the airport. • On return home from overseas you then take a taxi to your home in City A to collect your car and then travel onto the employer to continue your work. If you didn't use your own vehicle the employer would have paid for a rental car and overnight accommodation.

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

Reasons for decision: Summary: Generally the expenses of travel to and from work are not deductible. This is either because such expenditure is private in nature, or because it is not an expense incurred in gaining or producing assessable income. Lunney v. Commissioner of Taxation [1958] ALR 225; 1958 0311H HCA; 100 CLR 478; (1958) 11 ATD 404; (1958) 32 ALJR 139 ( Lunneys case) introduced what is now regarded as the essential character test. This test requires that for an expense to be deductible, it must have the essential character of a business or income producing expense. The taxpayer in this case sought to deduct the cost of travelling from his home to his work. The expenses were disallowed as being private and domestic, establishing the broad principle that costs incurred because of living in one place while working in another cannot be regarded as deductible. The fact that certain expenditure, such as travelling to work, must be incurred in order to be able to derive assessable income, does not necessarily mean that the expenditure is incidental and relevant to the derivation of assessable income or that it is incurred in the course of gaining or producing assessable income. It is a prerequisite to the earning of assessable income rather than being incurred in the course of gaining that income. In your case you are not entitled to a deduction for the expenses incurred to travel in either direction between your home in City A and your regular place of work at City B. These expenses are not incurred to gain or produce your assessable income; rather, they are incurred to enable you to commence, or return home after completing your income earning activities. These expenses are considered to be private or domestic in nature. However, you are entitled to a deduction for the cost of travelling to and from your City A home and the airport.