Private ruling: Deductibility for accommodation, meals and travel expenses
Date of advice: 16 November 2018
Published: February 2019
Ruling period: Year ended 30 June 2019 | Year ended 30 June 2020
Date scheme commenced: 1 July 2018

Ruling: Q1: Are you entitled to a deduction for accommodation, meals and travel expenses incurred while working away from your family home? | A1: No.

Relevant facts and circumstances: 1. You are seeking a ruling on whether you can claim a deduction for travel, meal and accommodation expenses you may incur relating to employment you are currently negotiating. 2. You are a working in a regional area. 3. Your permanent place of residence is your family home in W. 4. You are currently negotiating employment in X. 5. The number of days per week you may be working in X is two. This may include weekends. 6. The contract is for six months. There are no plans for further extension. 7. No travel, meal or accommodation allowance has been negotiated. 8. You are not required to sleep away from home. 9. You will be staying in hotel like accommodation.

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 outgoings to the extent to which they are incurred in gaining or producing assessable income, or are necessarily incurred in carrying on a business for that purpose. However, a deduction is not allowable for outgoings that are of a capital, private or domestic nature. | Detailed Reasoning - Accommodation: The issue of expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location was considered in FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 ( Toms' Case ). In Toms' Case , the taxpayer was a forest worker who during the working week lived in a caravan in a bush camp 108 kilometres from his family home in Grafton. He claimed it was too far to travel each day to his work in the forest, so that it was necessary to establish a caravan at the camp. He would return home on weekends. He claimed the costs of maintaining his caravan and other living expenses such as the cost of heating and lighting. The Federal Court held that the expenses incurred in relation to the temporary accommodation near the workplace while maintaining a family residence in another location were dictated not by his work but by private considerations, and therefore were not deductible. In your case, you will incur expenses for hotel/motel accommodation closer to your place of work than your principal residence in W. However, as in Toms’ Case , these expenses are incurred for private considerations and are preliminary to the earning of assessable income. A deduction is therefore not allowable for your hotel/motel accommodation expenses. | Detailed Reasoning - Travel expenses Motor Vehicle: In considering the deductibility of travel expenses, a distinction is made between travel to work and travel on work. It is only if the duties of the job require a taxpayer to travel that the taxpayer's expenses can be deducted. In general, a deduction is not allowable for the cost of travel by an employee between their home and their normal workplace as it is considered private in nature. Taxation Ruling TR 95/34, paragraph 77 explains that the cost of such travel is incurred to put the employee in a position to perform their duties of employment, rather than in the performance of those duties. This principle is based on the case Lunney v. Commissioner of Taxation ALR 225; 1958 0311H HCA; 100 CLR 478; (1958) 11 ATD 404; (1958) 32 ALJR 139 which 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. It is a prerequisite to the earning of assessable income rather than being incurred in the course of gaining that income. The essential character of the travel to and from 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 what distance from work. In your case, you will incur expenses for travel between your home and your work. This travel is incurred in order to put you in a position to perform your duties of your employment; it is not incurred in the performance of the duties of your employment. Travel is not a part of your actual work duties. Taxation Ruling TR 95/34 paragraph 22 states that for the travel to be a fundamental part of an employees work, travel must be an essential feature of an employee’s duties. Your duties will only commence when you reach the work site where you carry out your work. You are not considered to be travelling in the performance of your duties from the moment you leave your home. The motor vehicle expenses you will incur in travelling between your places of residence and work are private in nature. Therefore, you are not entitled to a deduction for these expenses under section 8-1 of the ITAA 1997. | Detailed Reasoning - Meal expenses: Taxation Ruling TR 95/13 deals with work related expenses claimed by employee police officers and discusses the deductibility of meal expenses. Although you are not a police officer the principles of deductibility outlined in this ruling are the same. TR 95/13 says a deduction is not allowable for the cost of meals eaten by employees in the normal course of a working day. These expenses are generally considered to be of a private nature and are not incurred in producing assessable income. There are, however, two exceptions to this general rule, being meals claimed as part of a travel expense and overtime meal allowances. In respect to travel expenses, where employees are required to sleep away from home as part of their employment duties, a deduction for meals and accommodation may be allowable. You are not negotiating a travel, accommodation or meal allowance in your contract. You will not be required to sleep away from home.