Private ruling: Travel and home office
Published: May 2014
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014
Date scheme commenced: On or after 1 January 2011

Ruling: Q1: Are you entitled to a deduction for home office occupancy expenses? | A1: No. | Q2: Are you entitled to a deduction for home office running expenses? | A2: Yes. | Q3: Are you entitled to a deduction for travel between home and your usual work or locum activities? | A3: No. | Q4: Are you entitled to a deduction for motor vehicle expenses when travelling directly between your main job and your locum jobs? | A4: Yes. | Q5: Are you entitled to a deduction for accommodation and meal expenses when travelling to and from your locum jobs? | A5: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Section 28-12

Reasons for decision: Summary: 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. For an expense to constitute an allowable deduction, it must be shown that they were incidental or relevant to the production of the taxpayer's assessable income ( Ronpibon Tin NL & Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 4 AITR 236; (1949) 8 ATD 431). As a general rule, any expenses incurred which relate to the use or ownership of a home will be of a private or domestic nature, and therefore not deductible under section 8-1 of the ITAA 1997. However, a taxpayer who carries on part or all of their employment activities from home may be entitled to a deduction for part of the outgoings on the home. The deductions allowable depend on whether the home can be regarded as a place of business, or whether a room of the home is merely used as a study or home office. The deductible expenses in respect of a home can be divided into two broad categories: • Expenses relating to ownership or use of a home which are not affected by a taxpayers income earning activities (i.e. occupancy costs) • Expenses relating to the use of facilities within the home (i.e. running costs) If an area of the home has the character of a place of business, some of the expenses from both the above categories may be claimed as a deduction. However, where an area of a home is simply used in connection with income producing activities, but does not have the character of a place of business, only running costs are allowable. The amounts allowable as deductions are the additiona l expenses incurred as a result of income producing activities. Whether an area of a taxpayer's home has the character of a place of business depends upon: • The essential character of the area; • The nature of the taxpayer's business; • The area is clearly identifiable as a place of business • The area is not readily suitable or adaptable for use for private or domestic purposes; • The area is used exclusively or almost exclusively for income producing purposes; • The area is used regularly for visits of clients or customers; • The taxpayer requires a place of business; • The taxpayer does not have an alternative place of business; and • The area is used exclusively or almost exclusively for income producing purposes. Based on the above information and the distinctions outlined in TR 93/30, we consider that the area set aside in your home is more readily identifiable as a private study or home office used in connection with income earning activity rather than as a place of business. Accordingly, as your home office does not meet the criteria for a 'place of business', you are not entitled to a deduction under section 8-1 of the ITAA 1997 for occupancy expenses of your home, as they are considered private and domestic in nature. However, you are entitled to a deduction for the additional 'running expenses' of the home office. The amount that you are entitled to claim is the difference between what was actually paid for heating/cooling, lighting, cleaning and the decline in value of any office furniture you own and use and what would have been paid had you not worked from home. Alternatively, the Commissioner accepts a deduction calculated at the rate of 34 cents per hour for the time when you use the room exclusively for work related purposes. This rate covers home office running expenses for electricity and the decline in value of office furniture. In order to be entitled to claim home office running expenses at a rate of 34 cents per hour, you must keep a diary for at least a four week period to establish the work related use of the home office. It is not sufficient for you to state that you use your home office exclusively for work; you need to be able to substantiate your claim. | Detailed Reasoning - Home to work: 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 travel between home and work is generally incurred to put the employee in a position to perform duties of employment, rather than in the performance of those duties (see paragraph 77 of Taxation Ruling TR 95/34). However, there are situations where it has been accepted that travel by employees from home to work is deductible. Taxation Ruling IT 2543 summarises these situations as follows: (a) the taxpayer's home constitutes a place of employment and travel is between two places of employment or business; (b) the taxpayer's employment can be construed as having commenced before or at the time of leaving home; (c) the taxpayer has to transport by vehicle bulky equipment necessary for employment; (d) the taxpayer's employment is inherently of an itinerant nature; (e) the taxpayer is required to break his or her normal journey to perform employment duties (other than including incidental duties such as collecting newspapers, mail, etc.) on the way from home to the usual place of employment, or from the place of employment to home. In your case, we accept that you have a number of locations where you perform your locum duties. However, the only situation which might apply to you is whether you are considered to have commenced work before leaving home. In FC of T v. Collings 76 ATC 4254; 6 ATR 476, the taxpayer was engaged in the conversion of a computer facility and often used a personal computer at home that was connected by telephone to her employer's computer. If the problem could not be fixed through the telephone connection, the taxpayer was required to travel to the site. It was held that travel from home to the site was an allowable deduction as the performance of duties had commenced and the travel was effectively between two work sites (see Taxation Rulings IT 112). In your case, you undertake the administration part of your duties at your home before and after attending at the place to carry out your work. It is not considered that your work has commenced prior to leaving home. Rather, it is considered that you undertake part of your duties at home in preference to completing them while at the place. Therefore, you are not entitled to a deduction for home to work travel. | Detailed Reasoning - Travel directly between your main activity and your locum activities: Paragraph 34 of Miscellaneous Taxation Ruling MT 2027 states that travel from home to an alternative work place is allowable where the following criterions are met: • the employee has a regular place of employment • in the performance of their duties as an employee, travel is undertaken to an alternative destination which is not itself a regular place of employment • the journey is undertaken to a location at which the employee performs substantial employment duties In your case, you sometimes travel directly from your main activity to the place of your locum activity. As you satisfy all the above criteria, the expenses you incur in travelling directly between the two activities is deductible. Special substantiation rules apply to car expenses and section 28-12 of the ITAA 1997 provides that if you own or lease a car or hire a car under a hire purchase agreement, you must calculate your car expense using one of the four methods in Division 28 of the ITAA 1997. | Detailed Reasoning - Accommodation and meals: Generally, accommodation expenses are private in nature and are not deductible. 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 considered that the caravan was rendered necessary as much by the taxpayer's choice of the place of his residence in Grafton as by his choice of employment in the forest, and its purpose was to enable him to retain his residence at Grafton although employed in the forest. It was 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. You incur expenses for accommodation and meals on occasions when these are not provided to you by the places to enable you to work a long way from your residence. However, as in Toms' Case , the expenses are a prerequisite to the earning of assessable income. They are incurred in order to enable you to earn income but are not incurred in the course of gaining or producing that income. A deduction is therefore not allowable for your accommodation and meal expenses. When travelling to locum placements you are not considered to be travelling on work but travelling to work. The expenses are incurred to put you in a position to perform duties of your employment and consequently the costs of accommodation and meals remain private in nature.

Relevant facts: You are a specialist professional. | You also undertake locum work at a large number of different places. You have to source and manage your own locum activities. | The duration of your locum assignments varies from two days to a month. | Each place where you do your locum work provides reception staff for bookings and prepares client history folders. | No scheduling, management, accounting or typing assistance is provided nor space for filing or storage. These must be done in your own time with your own resources. | You have a dedicated office at your home to undertake the administration part of your work. | You carry client files with you as there are no facilities available at any place you work. The equipment you carry is not considered to be bulky. | When working out of hotel accommodation, you take sufficient electronic equipment, other equipment and professional references with you. Generally, the employer organisation will pay for your accommodation. They will also occasionally provide airfares and a car at the location. However, there are occasions where you have to incur your own travel expenses. | You undertake the scheduling, management and accounting in your home office before travelling to the work location and generally upon return to your home office. | You have frequently had to travel direct from your main job to the airport or locum place to be able to make your scheduled shifts.