Private ruling: Work Related Expenses
Date of advice: 6 June 2016
Published: July 2016
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Can you claim a deduction for the airfares? | A1: No. | Q2: Can you claim a deduction for accommodation, transport and living expenses whilst attending your employment induction? | A2: Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are a Fly In Fly Out (FIFO) worker. You were required by your employer to undergo an induction course. The induction course ran for two days and upon completing this course you flew to what would be your ordinary place of work. You travelled via plane the day before the induction course started. You transported your tools and safety equipment (approximately 35 kg in total) as well as your personal effects that would be needed in your ordinary place of work. The dimensions of the bag that you use to transport your tools and safety equipment were approximately 90cm by 45cm. You are an airline membership holder and this membership does not require for you to pay any fees for excess luggage. During the completion of your induction you were required to cover all of your transport, living, and accommodation expenses.

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

Reasons for decision: Summary: You cannot claim a deduction for the cost of airfares from your home to your place of work (induction course) however, you can claim a deduction for the accommodation, living, and transport expenses that you incurred whilst completing your work induction. | Detailed Reasoning - Airfares: 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 where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. 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. A deduction is generally not allowable for the cost of travel by an employee between home and their normal workplace as it is considered to be a private expense. The cost of this travel is incurred to put you in a position to perform your duties of employment, rather than in the performance of those duties. (Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses ). Lunney v. Commissioner of Taxation [1958] ALR 225; 1958 0311H HCA; 100 CLR 478; (1958) 11 ATD 404; (1958) 32 ALJR 139 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 reasons given by the High Court were twofold. 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 have incurred expenses for the airfares 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. There is an exception to the rule that all travel to and from work is that of a private and/or domestic nature and that is if you are transporting bulky equipment. You have provided information on the weight and size of your tools and safety equipment. However, you have also stated that your airline membership does not require you to pay any extra cost for excess baggage. Due to this the Commissioner is of the view that you have not incurred an expense in relation to transporting this equipment and therefore it's deductibility for this reason is not considered. To conclude, the airfare expense you incurred for the travel between your home and work is private in nature. Therefore, you are not entitled to a deduction for this expense under section 8-1 of the ITAA 1997. | Detailed Reasoning - Accommodation, living and transport expenses: You were required to undergo your induction for two days before moving on to your usual place of work. Due to this your accommodation, living and transport expenses necessarily incurred in gaining or producing assessable income. These expenses are not capital, private, domestic in nature and they are not incurred in gaining or producing exempt income. Therefore, you will be able to claim a deduction under section 8-1 of the ITAA 1997 for these expenses.