Private ruling: Accommodation expenses
Published: July 2011
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you entitled to a deduction for accommodation expenses? | A1: No.


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 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, or relate to the earning of exempt income. 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. Where it has been established that a property used to accommodate a taxpayer amounts to a second residence, the Courts and the Administrative Appeals Tribunal have consistently held that the essential character of the expenses incurred is of a private or domestic nature unconnected with income-producing activities and, therefore, the expenses are not deductible. The reasoning in these cases is that a taxpayer's choice to establish a residence is not dictated by travel needs, but by considerations of a private or domestic nature. It follows that the required connection between second residence expenses and a taxpayer's income-producing activities is absent. 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 your case, you have established a second residence at a location close to your workplace. The fact that it is a requirement that you reside within X hour travel time of the base does not change the nature of the expense. Your accommodation expenses are considered to be of a private and domestic nature. Accordingly, a deduction for these expenses is not allowable.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | Your residential home is in City A. | You were offered a transfer to City B due to a shortage of employees at this location. | You accepted the offer as there would be greater opportunities for promotion and there would be an increase in your wage by accepting the transfer. | Due to the higher living costs in City B, your employer agreed to increase your gross pay. | It is a condition of your employment that you reside within X hour travel time of the base due to standby requirements and to ensure reasonable response times. | You have rented accommodation in City B and commute back to City A on your days off.