Private ruling: Work related expenses
Published: August 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for the costs incurred to obtain a driver's licence? | A1: No.

Relevant facts and circumstances: You recently lost your licence. Your employment requires a driver's licence You applied to have an extraordinary licence so that you can continue to work. You received clearance to drive work vehicles only during work hours. You are not entitled to drive during private hours.

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

Reasons for decision: Summary: Section 8-1 of the Income Taxation Assessment Act 1997 allows a deduction for all losses and outgoings to the extent they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. Taxation Ruling TR 95/18 states that a deduction is not allowable for the cost of obtaining or renewing a driver's licence as it is a private expense. Paragraph 77 of TR 95/18 explains that while the holding of a drivers licence may be a condition of employment, it does not follow that the licence fees are deductible. This principle is confirmed in Taxation Determination TD 93/108. In Case R49 84 ATC 387; 27 CTBR(NS) Case 104 , it was held that even though travel was an essential element of the work to be performed by the taxpayer, a driver's licence was still an expense that was private in nature and the cost was not an allowable deduction. In Case P54, 82 ATC 249, a travelling salesman who lost his drivers licence for 3 months applied to the Court for a restricted licence in order to continue to undertake his income-earning activities. It was held that while the holding of a driver's licence was an essential prerequisite to the derivation of the taxpayer's income, the expenditure of obtaining the restricted licence was not incurred in the activities by which he gained his assessable income. It was in fact an outgoing that preceded these activities and made them possible. Therefore, the expenses incurred in connection with the restricted licence were not deductible. As the cost of a licence is private in nature it follows that any expense associated in obtaining the licence, such as application fees, is also considered to be a private expense. Your situation is similar to that of the taxpayer in Case P54 . You have incurred expenses to enable you to obtain an extraordinary licence after you lost your driver's licence so that you could continue to work. While we acknowledge that the licence is an essential prerequisite to the derivation of your income, the requirement that you hold a driver's licence is not sufficient to change the nature of the expenses from being private or capital in nature. Therefore, you are not entitled to a deduction for the expenses incurred under section 8-1 of the ITAA 1997.