Taxation Ruling

TR 95/8

Income tax: employee cleaners - allowances, reimbursements and work-related deductions

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FOI status:

may be releasedFOI number: I 1016397

contents para
What this Ruling is about
1
Class of person/arrangement
Date of effect
9
Ruling
11
Allowances
Reimbursements
Deductions
Explanations
24
Deductibility of work-related expenses
Common work-related expense claims
Alternative views
155
Index of explanations
159

Preamble

This Ruling, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953, is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Ruling is a public ruling and how it is binding on the Commissioner.

What this Ruling is about

Class of person/arrangement

1. This Ruling applies to employee cleaners.

2. This Ruling deals with:

(a)
the assessability of allowances and reimbursements received by employee cleaners; and
(b)
deductions for work-related expenses generally claimed by employee cleaners.

3. The Ruling discusses the assessability of allowances and reimbursements received under section 25 and paragraphs 26(e) and 26(eaa) of the Income Tax Assessment Act 1936 (the Act).

4. The Ruling also discusses whether deductions are allowable or are specifically excluded (or limited) under subsections 51(1), 51(4) or 51(6), or sections 51AGA, 51AH, 51AL, 53, 54, 55, 57AF, 61 or 82A of the Act.

5. The tax treatment of allowances and reimbursements received is examined at paragraphs 11 to 20 in the Ruling section.

6. The common work-related expenses incurred by employee cleaners and the extent to which they are allowable deductions are discussed, in alphabetical order, at paragraph 23 in the Ruling section. The substantiation provisions are not discussed in depth in this Ruling.

7. Further explanation about specific deduction items in the Ruling section is contained in the Explanations section at the paragraph references indicated.

8. Each year the Australian Taxation Office (ATO) carries out audits of taxpayers' returns. This Ruling will be used by the ATO when it undertakes audits of the returns of employee cleaners. Where there is a tax shortfall, any penalties imposed will be in terms of Taxation Ruling TR 94/3 on the basis that the views of the ATO on the correct operation of the law have been expressed in a public ruling.

Date of effect

9. This Ruling applies to years commencing both before and after its date of issue. However, the Ruling does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Ruling (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).

10. If a taxpayer has a more favourable private ruling (whether legally or administratively binding), this Ruling applies to that taxpayer to the extent of the inconsistency only from and including the 1995-1996 year of income.

Ruling

Allowances

11. The receipt of an allowance does not automatically entitle an employee cleaner to a deduction. The term 'allowance' does not include a reimbursement (see paragraphs 17 to 20).

12. If received, allowances fall into the following categories:

(a)
fully assessable to the employee with a possible deduction allowable, depending upon individual circumstances (paragraph 13);
(b)
fully assessable to the employee with no deduction allowable even though an allowance is received (paragraph 14);
(c)
fully assessable to the employee with a deduction allowable for expenses incurred subject to special substantiation rules (paragraph 15);
(d)
not assessable to the employee because the employer may be subject to Fringe Benefits Tax. A deduction is not allowable to the employee for expenses incurred against such an allowance (paragraph 16).

Allowances - possible deduction

13. The following allowances commonly received by employee cleaners are paid to recognise that expenses may be incurred by cleaners in doing their jobs. These allowances are fully assessable and deductions may be allowable depending on individual circumstances.

Allowance Possible allowable deduction (see Explanations section)
Mileage/travelling allowance Transport expenses
Motor vehicle expenses
Fares
Uniform Clothing
Laundry expenses

Allowances - no deduction allowable

14. The following allowances commonly received by employee cleaners are paid for carrying out work that may be considered unpleasant, special or dangerous, in recognition of holding special skills, or to compensate for industry peculiarities. The allowances are fully assessable and no deduction is allowable.

Broken shift
Division/District
First aid
Leading Hand
On call

Refuse Collection
Steam Cleaner
Toilet
Window Cleaning
Work in the rain

Reasonable allowance amounts

15. The Commissioner of Taxation publishes annually a Taxation Ruling that indicates amounts considered reasonable in relation to the following expenses:

(a)
overtime meal expenses;
(b)
domestic travel expenses; and
(c)
overseas travel expenses.

Allowances received in relation to these expenses are fully assessable. If an allowance is received and the amount of the claim for expenses incurred is no more than the reasonable amount, substantiation is not required. If the deduction claimed is more than the reasonable amount, the whole claim must be substantiated, not just the excess over the reasonable amount.

Allowances - not assessable and no deduction allowable

16. A deduction is not allowable to an employee cleaner in respect of expenses incurred against the following allowances:

(a)
living away from home; and
(b)
camping.

Note: these allowances are paid to an employee cleaner who:

*
is required to live away from home for extended periods;
*
receives the allowance as compensation for the cost of having to live away from home; and
*
does not receive the allowance as a form of travel allowance.

These allowances are not assessable to the employee cleaner as the employer is usually subject to Fringe Benefits Tax in respect of the allowances. If the allowance is paid wholly or in part for travel expenses, it is assessable to the cleaner and a deduction may be allowable (see Taxation Determination TD 93/230 and Travel expenses , paragraphs 145 to 149).

Reimbursements

17. If an employee cleaner receives a payment from his or her employer for actual expenses incurred, the payment is a reimbursement and the employer may be subject to Fringe Benefits Tax. Generally, if an employee cleaner receives a reimbursement, the amount is not required to be included in his or her assessable income and a deduction is not allowable (see Taxation Ruling TR 92/15).

18. However, if motor vehicle expenses are reimbursed by the employer on a cents per kilometre basis, the amount is included as assessable income of the employee cleaner under paragraph 26(eaa) of the Act. A deduction may be allowable in relation to motor vehicle expenses incurred (see Transport expenses, paragraph 117 to 144).

19. If the reimbursement by the employer is for the cost of a depreciable item (e.g., tools and equipment), a deduction is allowable to the employee cleaner for depreciation (see Taxation Determination TD 93/145 and Depreciation of tools and equipment , paragraphs 66 to 73).

20. If a payment is received for an estimated expense, the amount received by the employee cleaner is considered to be an allowance (not a reimbursement) and is fully assessable to the cleaner (see Allowances , paragraphs 11 to 16).

Deductions

21. A deduction is only allowable if an expense:

(a)
is actually incurred (paragraph 25);
(b)
meets the deductibility tests (paragraphs 26 to 33); and
(c)
satisfies the substantiation rules (paragraphs 34 and 35).

22. If an expense is incurred partly for work purposes and partly for private purposes, only the work-related portion is an allowable deduction.

23. The common work-related expenses incurred by employee cleaners and the extent to which they are allowable deductions are discussed below, in alphabetical order.

Bank fees: A deduction is allowable, as a work-related expense, for Financial Institutions Duty that relates to the direct depositing of salary and wages into the employee cleaner's bank account(s). A deduction is not allowable for any other bank fees as a work-related expense (Taxation Ruling IT 2084).
Child care: A deduction is not allowable for child care expenses (paragraphs 36 to 38).
Clothing, uniforms and footwear: A deduction is allowable for the cost of buying, hiring or replacing clothing, uniforms or footwear ('clothing') if these items are:

(a)
protective;
(b)
occupation specific;
(c)
compulsory and meet the requirements of Taxation Ruling IT 2641;
(d)
non-compulsory and entered on the Register of Approved Occupational Clothing or approved in writing by the ATO before 1 July 1995. These transitional arrangements cease to have effect from 1 July 1995. A deduction will not be allowable for expenditure incurred after 30 June 1995 in relation to clothing approved under the transitional arrangements; or
(e)
conventional, but satisfy the deductibility tests as explained in Taxation Ruling TR 94/22.

Expenditure on clothing, uniforms and footwear must satisfy the deductibility tests in subsection 51(1) and must not be private or domestic in nature (paragraphs 39 to 63).
Depreciation of tools and equipment: A deduction is allowable for depreciation to the extent of the work-related use of the tools and equipment. Any item of equipment bought on or after 1 July 1991 can be depreciated at a rate of 100% if its cost is $300 or less or its effective life is less than three years (paragraphs 66 to 73).
Driver's licence: A deduction is not allowable for the cost of acquiring or renewing a driver's licence (paragraphs 74 to 76).
Fares : A deduction is allowable for the cost of using public transport for work-related travel (see Transport expenses , paragraphs 117 to 144).
Fines: A deduction is not allowable for fines imposed under a law of the Commonwealth, a State, a Territory, a foreign country, or by a court (paragraph 77).
First aid courses: A deduction is allowable if it is necessary for an employee cleaner, as a designated first aid person, to undertake first aid training to assist in emergency work situations. If the cost of the course is met by the employer, or is reimbursed to the employee cleaner, no deduction is allowable.
Glasses/contact lenses: A deduction is not allowable for the cost of buying prescription glasses or contact lenses. The cost of safety glasses is an allowable deduction (see Protective equipment , paragraph 92).
Insurance of tools and equipment: A deduction is allowable for the cost of insurance of tools and equipment to the extent of their work-related use.
Laundry and maintenance of clothing, uniforms and footwear: A deduction is allowable for the cost of laundry and maintenance of supplied or purchased clothing, uniforms or footwear if these items are of a kind described under Clothing, uniforms and footwear (paragraphs 64 and 65).
Meals: A deduction is not allowable for the cost of meals eaten during a normal working day (paragraphs 78 to 84). If an award overtime meal allowance has been paid, a deduction may be allowable (see paragraphs 86 to 89). A deduction may be allowable if meal costs are incurred by an employee cleaner who travels for work-related purposes (see Travel expenses , paragraphs 145 to 149).
Motor vehicle expenses: See Transport expenses .
Newspapers: A deduction is not allowable for the cost of newspapers (paragraph 85).
Overtime meal expenses: A deduction is allowable for the cost of meals bought while working overtime if an award overtime meal allowance is received. Special substantiation rules apply (paragraphs 86 to 89).
Parking fees: A deduction is allowable for parking fees paid by an employee cleaner while travelling in the course of employment, e.g., between work places (paragraphs 90 and 91).
Protective equipment: A deduction is allowable for the cost of safety equipment such as gloves, safety glasses, goggles, breathing masks, etc. (paragraph 92). A deduction is not allowable for the cost of sunglasses, sunhats, sunscreens and wet weather gear that are worn or used to provide protection from the natural environment (paragraphs 45 to 48).
Repairs to tools and equipment: A deduction is allowable for repairs to tools and equipment to the extent of the work-related use of the item (paragraph 93).
Self education expenses: A deduction is allowable for the cost of self education if there is a direct connection between the self education and the cleaner's current income-earning activities. Self education costs can include fees, travel, books and equipment (paragraphs 94 to 100).
If self education expenses are allowable but also fall within the definition of 'expenses of self education' in section 82A of the Act, the first $250 is not an allowable deduction (paragraphs 101 to 103).
Stationery: A deduction is allowable for the cost of log books, diaries, etc., to the extent to which they are used for work-related purposes.
Technical or professional publications: A deduction is allowable for the cost of buying or subscribing to journals, periodicals and magazines that have a content specifically related to employee cleaners and are not general in nature (paragraphs 104 to 108).
Telephone, mobile phone, pager, beeper and other telecommunications equipment expenses: A deduction is not allowable where these items are supplied by the employer. If they are not supplied, a deduction is allowable for the rental cost or for depreciation on the purchase price to the extent of the work-related use of the item.
Cost of calls: A deduction is allowable for the cost of work-related calls (paragraphs 109 and 110).
Installation and connection costs: A deduction is not allowable for the cost of installing or connecting a telephone, etc. (paragraphs 111 and 112).
Rental costs: A deduction is allowable for a proportion of telephone/equipment rental costs if the employee cleaner can demonstrate that he or she is 'on call', or required to telephone their employer on a regular basis (paragraphs 113 to 115).
Silent telephone numbers: A deduction is not allowable for the cost of obtaining a silent telephone number (paragraph 116).
Tolls: A deduction is allowable for bridge and road tolls paid by an employee cleaner when travelling in the course of employment, e.g., between work places (paragraphs 90 and 91).
Tools: A deduction is allowable for depreciation of the cost of tools. Tools bought after 1 July 1991 can be depreciated at a rate of 100% if the cost of a particular item is $300 or less, or its effective life is less than three years (paragraph 69). A deduction is allowable for the cost of repairs to tools to the extent of their work-related use (paragraph 93).
Transport expenses: Transport expenses include public transport fares and the running costs associated with using motor vehicles, motor cycles, bicycles, etc., for work-related travel. They do not include accommodation, meals and incidental expenses (see Travel expenses at paragraphs 145 to 149). The treatment of transport expenses incurred by an employee cleaner when travelling is considered below:
Travel between home and work: A deduction is not allowable for the cost of travel between home and the normal work place as it is generally considered to be a private expense. The fact that travel is outside normal working hours or involves a second or subsequent trip does not change this principle. This principle is not altered by the performance of incidental tasks en route (paragraphs 118 to 123).
Travel between home and work - transporting bulky equipment: A deduction is allowable if the transport expenses can be attributed to the transportation of bulky equipment rather than to private travel between home and work. A deduction is not allowable if the equipment is transported to and from work by the employee cleaner as a matter of convenience.
A deduction is not allowable if a secure area for the storage of equipment is provided at the work place (paragraphs 124 to 127).
Travel between two separate work places if there are two separate employers involved: A deduction is allowable for the cost of travelling directly between two places of employment (paragraphs 128 to 130).
Travel from the normal work place to an alternative work place while still on duty and back to the normal work place or directly home: A deduction is allowable for the cost of travel from the normal work place to other work places. A deduction is also allowable for the cost of travel from the alternative work place back to the normal work place or directly home. This travel is undertaken in the course of gaining assessable income and is allowable as a deduction (paragraphs 131 and 132).
Travel from home to an alternative work place for work-related purposes and then to the normal work place or directly home: A deduction is allowable for the cost of travel from home to an alternative work place and then on to the normal work place or directly home (paragraphs 133 and 134).
Travel between two places of employment or between a place of employment and a place of business: A deduction is allowable for the cost of travel directly between two places of employment or a place of employment and a place of business, provided that the travel is undertaken for the purpose of carrying out income-earning activities (paragraphs 135 to 141).
Travel in connection with self education: See Self education expenses (paragraphs 97 to 99).
Travel expenses: A deduction is allowable for the cost of travel expenses (accommodation, fares, meals and incidentals) incurred by an employee cleaner when travelling in the course of employment, e.g., travel interstate to supervise at another work place (paragraphs 145 and 146). Special substantiation rules apply (paragraphs 147 to 149).
Union/professional association fees and levies: A deduction is allowable for annual fees paid to unions or professional associations, although a deduction is not allowable for joining fees. A deduction is not generally allowable for levies (paragraphs 150 to 153). A deduction is not allowable for contributions to staff social clubs or associations.
Vaccinations: A deduction is not allowable for the cost of vaccinations as a precaution for employee cleaners at risk from infectious diseases (paragraph 154).

Wet weather gear: A deduction is not allowable if this clothing is worn to provide conventional protection from the natural environment. A deduction is allowable if the nature of the work creates conditions that make it necessary for the employee cleaner to provide protection to his or her person or clothing (paragraphs 45 to 48).

Explanations

Deductibility of work-related expenses

24. In short, a deduction is allowable if an expense:

(a)
is actually incurred;
(b)
meets the deductibility tests; and
(c)
satisfies the substantiation rules.

Expense actually incurred

25. The expense must actually be incurred by the employee cleaner to be considered for deductibility. A deduction is not allowable for expenses not incurred by the cleaner, e.g., if items are provided free of charge. Under section 51AH of the Act, a deduction is not generally allowable if expenses are reimbursed (see paragraphs 18 and 19 for exceptions to this rule).

Expense meets deductibility tests

26. The basic tests for deductibility of work-related expenses are in subsection 51(1) of the Act. It says:


'All losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income, or are necessarily incurred in carrying on a business for the purpose of gaining or producing such income, shall be allowable deductions except to the extent to which they are losses or outgoings of capital, or of a capital, private or domestic nature, or are incurred in relation to the gaining or production of exempt income.'

27. A number of significant court decisions have determined that, for an expense to satisfy the tests in subsection 51(1) of the Act:

(a)
it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense (Lunney v. FC of T; Hayley v. FC of T (1958) 100 CLR 478; [1958] ALR 225; 11 ATD 404 (Lunney's case));
(b)
there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income (Ronpibon Tin NL v. FC of T (1949) 78 CLR 47; 8 ATD 431); and
(c)
it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income (Charles Moore & Co (WA) Pty Ltd v. FC of T (1956) 95 CLR 344; 11 ATD 147; 6 AITR 379; FC of T v. Cooper (1991) 29 FCR 177; 91 ATC 4396; (1991) 21 ATR 1616 (Cooper's case); Roads and Traffic Authority of NSW v. FC of T (1993) 43 FCR 233; 93 ATC 4508; (1993) 26 ATR 76; FC of T v. Hatchett (1971) 125 CLR 494; 71 ATC 4184; 2 ATR 557 (Hatchett's case)).

28. A deduction will be denied under the exception provisions of subsection 51(1) if the expense is incurred for an item that is:

(a)
private or domestic in nature (e.g., sunscreen or driver's licence);
(b)
capital, or capital in nature (e.g., purchase of an industrial vacuum cleaner); or
(c)
incurred in earning tax exempt income (e.g., expenses related to income from membership of the Army Reserve).

29. Private or domestic expenditure is considered to include costs of living such as food, drink and shelter. In Case T47 18 TBRD (NS) 242; 14 CTBR (NS) Case 56, J F McCaffrey (Member) stated (TBRD at 243; CTBR at 307):


'In order to live normally in our society, it is requisite that individual members thereof be clothed, whether or not they go out to work. In general, expenditure thereon is properly characterised as a personal or living expense...'

30. The fact that an expense is voluntarily incurred by an employee cleaner does not preclude it from being an allowable deduction (Taxation Ruling IT 2198).

31. Example: Graeme, an employee cleaner, is supplied with protective overalls by his employer and also voluntarily buys another pair. The cost of the protective overalls that he purchased and the laundry costs of both pairs are allowable deductions.

32. The fact that an expense is incurred by an employee cleaner at the direction of his or her employer does not mean that a deduction is automatically allowable.

33. In Cooper's case a professional footballer was denied the cost of purchasing food and drink. His coach had instructed him to consume additional food, so he would not lose weight during the football season. The character of the expense was private.

In Cooper's case, Hill J said (FCR at 200; ATC at 4414; ATR at 1636):


'...the fact that the employee is required, as a term of his employment, to incur a particular expenditure does not convert expenditure that is not incurred in the course of the income producing operations into a deductible outgoing.'

Expense satisfies the substantiation rules

34. The income tax law requires substantiation of certain work-related expenses. If the total of these expenses is $300 or less, the employee cleaner can claim the amount without getting written evidence (except for certain car, travel allowance and meal allowance expenses), although a record must be kept of how the claim was calculated.

35. A deduction is not allowable if the substantiation requirements are not met.

Common work-related expense claims

Car expenses: See Transport expenses.

Child care

36. A deduction is not allowable for child care expenses, even if it is a prerequisite for an employee cleaner to obtain and pay for child care so that he or she can go to work and earn income. A deduction is also not allowable for child care expenses incurred by an employee cleaner to undertake studies relevant to his or her employment.

37. The High Court held in Lodge v. FC of T (1972) 128 CLR 171; 72 ATC 4174; 3 ATR 254, that child care expenditure was neither relevant nor incidental to gaining or producing assessable income and was therefore not deductible. The expenditure was also of a private or domestic nature (see also Jayatilake v. FC of T (1991) 101 ALR 11; 91 ATC 4516; (1991) 22 ATR 125).

38. Taxation Determination TD 92/154 provides further information about these expenses.

Clothing, uniforms and footwear

39. A deduction is allowable for the cost of buying, hiring or replacing clothing, uniforms and footwear ('clothing') if:

(a)
the clothing is protective in nature;
(b)
the clothing is occupation specific and not conventional in nature;
(c)
the clothing is a compulsory uniform and satisfies the requirements of Taxation Ruling IT 2641;
(d)
the clothing is a non-compulsory uniform or wardrobe that has been either:

(i)
entered on the Register of Approved Occupational Clothing; or
(ii)
approved in writing by the ATO under the transitional arrangements contained in Taxation Laws Amendment Act No 82 of 1994. These transitional arrangements cease to have effect from 1 July 1995. A deduction will not be allowable for expenditure incurred after 30 June 1995 in relation to clothing approved under the transitional arrangements; or

(e)
the clothing is conventional and the taxpayer is able to show that:

(i)
the expenditure on the clothing has the essential character of an outgoing incurred in gaining or producing assessable income;
(ii)
there is a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income; and
(iii)
the expenditure is not of a private nature

(see Taxation Ruling TR 94/22 covering the decision in FC of T v. Edwards (1994) 49 FCR 315; 94 ATC 4255; (1994) 28 ATR 87 (Edwards' case)).

40. Expenditure on clothing, uniforms and footwear must satisfy the deductibility tests in subsection 51(1) and must not be capital, private or domestic in nature.

Protective clothing

41. Employee cleaners may be provided with protective clothing by their employer (e.g., aprons or overalls for the protection of their conventional clothing). Employee cleaners may also buy additional items of protective clothing and the cost of this clothing is an allowable deduction under subsection 51(1) of the Act.

42. It is considered that heavy duty conventional clothing such as jeans, drill shirts and trousers is not protective. We consider that the cost of these items is a private expense and is not an allowable deduction (Taxation Determination TD 92/157).

43. A deduction is allowable for expenditure on footwear specifically designed to provide protection to the wearer at work, e.g., steel-capped boots, rubber boots (gum boots) and special non-slip shoes.

44. A deduction is not allowable for the cost of conventional footwear such as running shoes, sports shoes and casual shoes, as it is not considered to be protective. We consider that the cost of this footwear is a private expense and is not an allowable deduction.

45. A deduction is not allowable for the cost of items that provide protection from the natural environment (e.g., sunglasses, sunhats, sunscreen, wet weather gear and thermal underwear). The cost of these items is considered to be a private expense. This view is supported in Case Q11 83 ATC 41; 26 CTBR (NS) Case 75 and in Case N84 81 ATC 451; 25 CTBR (NS) Case 43 (see also Taxation Ruling IT 2477 and Taxation Determination TD 93/244).

46. An exception to this general rule can arise if the nature of the work (rather than the natural environment) creates conditions that make it necessary for the employee cleaner to provide protection to his or her person or clothing (e.g., wet weather gear worn when using chemicals or high pressure water hoses).

47. Example: Barry uses a high pressure hose in his job as an employee cleaner. He wears heavy duty wet weather gear to protect himself and his clothing. A deduction is allowable for the cost of buying and maintaining this protective wet weather gear.

48. In Case Q11 the taxpayer was a self-employed lawn mowing contractor. Amongst other things, he claimed the cost of transistor batteries and sunscreen lotions. Dr G W Beck (Member) said (ATC at 43; CTBR at 525):


'...a man catering for his desire to listen to music and protecting himself from skin damage is acting in a private capacity and the expenditure is thus of a private nature and excluded by sec. 51...'

Although this taxpayer was self-employed, the same deductibility tests as set out in paragraphs 26 to 33 applied.

Occupation specific clothing

49. Occupation specific clothing is defined in subsection 51AL(26) of the Act. It distinctly identifies the employee as belonging to a particular profession, trade, vocation, occupation or calling. It is not clothing that can be described as ordinary clothing of a type usually worn by men and women regardless of their occupation. Examples of clothing that are considered to be occupation specific are female nurses' traditional uniforms, chefs' checked pants and a religious cleric's ceremonial robes.

50. It is not considered that employee cleaners would wear occupation specific clothing.

Compulsory uniform or wardrobe

51. A 'corporate' uniform or wardrobe (as detailed in Taxation Ruling IT 2641) is a collection of inter-related items of clothing and accessories that are unique and distinctive to a particular organisation.

52. Paragraph 10 of IT 2641 lists the factors to be considered in determining whether clothing constitutes a 'corporate' wardrobe or uniform.

53. In Case R55 84 ATC 411; 27 CTBR (NS) Case 109, it was concluded (ATC at 416; CTBR at 874) that:


'...conventional clothing of a particular colour or style does not necessarily, because of those factors alone, assume the character of a uniform. Likewise, ordinary clothing is not converted into a uniform by the simple process of asserting that it fills that role or by the wearing of a name plate, etc. attached to clothing.'

54. In Case U95 87 ATC 575, a shop assistant employed by a retail merchant was required to dress according to the standard detailed in the staff handbook. The prescribed dress standards were as follows (ATC at 577):


'SELLING STAFF: FEMALE STAFF - To wear a plain black tailored dress, suit or skirt, plain black or white blouse, either long or short sleeved. No cap sleeved, or sleeveless dresses or blouses are to be worn.'

55. The deduction for clothing was denied because there was (ATC at 580):


'...nothing distinctive or unique about the combination of clothing which would identify the wearer as a [name of employer] shop assistant or even a shop assistant from another department store. The colour combination of the clothing would be included in the range of acceptable street dress unassociated with business or employment, as well as a combination of colours sometimes worn by female drink or food waiting staff.'

Non-compulsory uniform or wardrobe

56. A deduction is not allowable for the purchase and maintenance costs of a non-compulsory uniform or wardrobe clothing unless the conditions outlined in section 51AL of the Act are met. Section 51AL provides that expenditure on a non-compulsory uniform or wardrobe will be allowable under subsection 51(1) of the Act only if the design of the clothing has been entered on the Register of Approved Occupational Clothing, or if the design of the clothing is approved in writing by the ATO under the transitional arrangements. These transitional arrangements cease to have effect from 1 July 1995. A deduction will not be allowable for expenditure incurred after 30 June 1995 in relation to clothing approved under the transitional arrangements.

57. If employee cleaners are provided with uniforms by their employers, that bear the employer's logo, and it is not compulsory to wear the uniform, no deduction is allowable for maintenance costs unless the uniform satisfies the requirements of section 51AL of the Act.

Conventional clothing

58. The views of the ATO on the treatment of costs of buying and maintaining conventional clothing are set out in Taxation Ruling TR 94/22. That Ruling sets out our views on the implications of the decision of the Full Federal Court of Australia in Edwards case. Ms Edwards was the personal secretary to the wife of a former Queensland Governor. She was able to establish that her additional clothing expenses were allowable in her particular circumstances. In most cases, expenses for conventional clothing will not meet the deductibility tests of subsection 51(1) of the Act as they are of a private nature (see also paragraphs 28 and 29).

59. There are a number of cases that support the general principle that the costs of conventional clothing do not meet the deductibility tests of subsection 51(1) of the Act.

60. In Case 48/94 94 ATC 422; AAT Case 9679 (1994) 29 ATR 1077, a self-employed professional presenter and speaker was denied a deduction for the cost of conventional clothing. The taxpayer gave evidence that she maintained a separate wardrobe to meet her work requirements, and that she used this wardrobe exclusively in relation to her work. Sometimes, a client would request that she dress in a specific manner when performing a presentation. Her image was of vital importance in both securing and performing her duties, and her clothes were an aspect of her image. The taxpayer submitted to the Tribunal that her matter could be paralleled to the facts in Edwards case.

61. Senior Member Barbour distinguished this case from Edwards case on the basis of the emphasis placed by the Tribunal and Court on Ms Edwards' additional changes of clothes throughout a work day - a fact not present in this one - and found the essential character of the expense to be private, saying (ATC at 427; ATR at 1083):


'While the A list clothes [those used exclusively for work] assisted in creating an image compatible with the applicant's perceptions of her clients' and audiences' expectations, her activities productive of income did not turn upon her wearing A list clothes, however important the applicant may have perceived these clothes to be in her presentation activities. There is not the requisite nexus between her income-earning activities and the A list clothing expenses.'

Senior Member Barbour went on to say (ATC at 428; ATR at 1084):


'For it was essential that the applicant wear something to her income-producing activities...the applicant's clothing needed to be suitable for the purpose of wearing to that presentation, but this does not change its character to a business expense, and I find that the nature of the expense is essentially private.'

62. In Case U80 87 ATC 470, a shop assistant was denied a deduction for the cost of black clothes. Senior Member McMahon stated (ATC at 472):


'The fact that the employer requires garments of a particular colour to be worn and would even terminate the employment if another colour was substituted, does not in any way detract from the character of the garments as conventional attire, the cost of which must be regarded as a private expense.'

63.A deduction is not allowable for the cost of conventional clothing commonly worn by employee cleaners, such as singlets, T shirts, flannelette shirts, drill shirts, drill trousers, shorts, jeans, socks, running shoes (joggers) and other conventional footwear. Expenses on these kinds of everyday clothing are considered to be private.

Laundry and maintenance

64. A deduction is allowable for the cost of cleaning and maintaining clothing that falls into one or more of the categories of deductible clothing listed in paragraph 39. This applies whether the clothing is purchased by the employee cleaner or supplied by the employer.

65. Further information can be found in Taxation Ruling IT 2452 and Taxation Determination TD 93/232.

Depreciation of tools and equipment

66. A deduction is not allowable under subsection 51(1) of the Act for the cost of tools and equipment as it is considered to be a capital expense.

67. A deduction is allowable under subsection 54(1) of the Act for depreciation of tools and equipment owned and used by an employee cleaner for income-producing purposes. In addition, a deduction for depreciation is allowable on tools and equipment that are not actually used during the year for income-producing purposes but are installed ready for use for that purpose and held in reserve.

68. There are two methods to calculate depreciation. These are the prime cost method and the diminishing value method. Depreciation using the prime cost method is calculated as a percentage of the cost of the equipment. Depreciation using the diminishing value method is calculated initially as a percentage of the equipment's cost and thereafter as a percentage of the written down value.

69. Any item of equipment bought on or after 1 July 1991 can be depreciated at a rate of 100% if its cost is $300 or less, or if its effective life is less than three years (section 55 of the Act). This means an immediate deduction is available for the cost of each item in the year in which it is purchased. However, the item may be depreciated at a rate less than 100% if the taxpayer so elects (subsection 55(8) of the Act). The current depreciation rates are set out in Taxation Ruling IT 2685.

70. If equipment is used partly in the course of employment and partly for other purposes, then the depreciation should be apportioned based on an estimate of the percentage of work-related use (section 61 of the Act).

71. Example: Alison is an employee cleaner who owns a vacuum cleaner. She uses this vacuum cleaner at work during the week and at home on weekends for her home cleaning. She is entitled to a deduction for a proportion of the depreciation based on the work use of the vacuum cleaner. A reasonable apportionment might be 5/7 business use.

72. If the equipment used is bought part way through the year, the deduction for depreciation should be apportioned on a pro-rata basis.

73. An arbitrary figure is not acceptable when determining the value of equipment for depreciation purposes (Case R62 84 ATC 454; 27 CTBR (NS) Case 113). In determining the value of an item to be depreciated, its opening value is the original cost to the taxpayer less the amount of any depreciation that would have been allowed if the unit had been used, since purchase, to produce assessable income (Taxation Determination TD 92/142).

Driver's licence

74. A deduction is not allowable for the cost of obtaining or renewing a driver's licence. The cost associated with obtaining a driver's licence is a capital or private expense. The cost of renewing a licence is a private expense.

75. 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 therefore not an allowable deduction under subsection 51(1) of the Act.

76. This principle is not altered if the holding of a driver's licence is a condition of employment (Taxation Determination TD 93/108).

Fares: See Transport expenses.

Fines

77. A deduction is not allowable for fines imposed under any law of the Commonwealth, a State, a Territory, a foreign country or by a court (subsection 51(4) of the Act).

Meals

78. A deduction is not allowable for the cost of meals consumed by employee cleaners in the normal course of a working day.

79. It is our view that the cost of meals will not have sufficient connection with the income-earning activity and, in any case, the cost is a private expense and fails to meet the tests of deductibility described in paragraphs 26 to 33.

80. The Full Federal Court considered the deductibility of food costs in Cooper's case. In that case, a professional footballer had been instructed to consume large quantities of food during the off-season to ensure that his weight was maintained. By majority, the Full Federal Court found that the cost of additional food to add to the weight of the taxpayer was not allowable. Hill J said (FCR at 199-200; ATC at 4414; ATR at 1636):


'The income-producing activities to be considered in the present case are training for and playing football. It is for these activities that a professional footballer is paid. The income-producing activities do not include the taking of food, albeit that unless food is eaten, the player would be unable to play. Expenditure on food, even as here "additional food" does not form part of expenditure related to the income-producing activities of playing football or training.'

Hill J went on to say (FCR at 201; ATC at 4415; ATR at 1638):


'Food and drink are ordinarily private matters, and the essential character of expenditure on food and drink will ordinarily be private rather than having the character of a working or business expense. However, the occasion of the outgoing may operate to give to expenditure on food and drink the essential character of a working expense in cases such as those illustrated of work-related entertainment or expenditure incurred while away from home.'

81. We do not accept that the cost of meals can be apportioned between what the cost of a home-made meal would be and the cost of a meal purchased during an ordinary working day.

82. A deduction is generally not allowable for the cost of food or meals consumed while on duty. These costs fail to meet the tests of deductibility described in paragraphs 26 to 33 and are considered to be private in nature.

83. In Case Y8 91 ATC 166; AAT Case 6587 (1991) 22 ATR 3037, a police officer claimed deductions for the cost of meals while performing special duties away from his normal place of residence. It was held that the cost of these meals was private in nature and no deduction was allowable under subsection 51(1) of the Act.

84. A deduction is allowable for the cost of meals bought while working overtime, if an award overtime meal allowance has been paid (paragraphs 86 to 89).

Motor vehicle expenses: See Transport expenses.

Newspapers

85. A deduction is not allowable under subsection 51(1) of the Act for the cost of newspapers and magazines, as it is a private expense. Even though an employee cleaner may be able to use part of the information in the course of his or her work, the benefit gained is usually remote and the proportion of the expense that relates directly to work is incidental to the private expenditure. This view is supported in Case P30 82 ATC 139; 25 CTBR (NS) Case 94 and Case P114 82 ATC 586; 26 CTBR (NS) Case 47.

Overtime meal expenses

86. A deduction is allowable for the cost of meals bought while working overtime if an award overtime meal allowance is received and the expenditure meets the deductibility tests in paragraphs 26 to 33.

87. An overtime meal allowance is paid under a law or industrial award for the purpose of enabling an employee to buy food and drink at meal or rest breaks while working overtime.

88. The general rule is that no deduction is allowed for work-related expenses unless written evidence, such as a receipt, is obtained. However, special substantiation rules apply to overtime meal expenses if an employee cleaner receives an overtime meal allowance paid under an industrial award. A deduction is allowable without substantiation for expenses incurred, provided the claim does not exceed the amount considered reasonable by the Commissioner of Taxation. Reasonable amounts are published annually by the Commissioner in a Taxation Ruling.

89. If the deduction claimed is more than the reasonable amount the whole claim must be substantiated, not just the excess over the reasonable amount.

Parking fees and tolls

90. A deduction is allowable for parking fees (but not fines) and tolls if the expenses are incurred while travelling:

(a)
between two separate places of work;
(b)
to a place of education for self education purposes (if the self education expenses are deductible); or
(c)
in the normal course of duty and the travelling expenses are allowable deductions.

This decision is supported by Case Y43 91 ATC 412; AAT Case 7273 (1991) 22 ATR 3402.

Note: A deduction is denied to an employee cleaner for certain car parking expenses where the conditions outlined in section 51AGA of the Act are met.

91. A deduction is not allowable for parking fees and tolls incurred when employee cleaners are travelling between their home and their normal place of employment (see Case C47 71 ATC 219; 17 CTBR (NS) Case 44). The cost of that travel is a private expense and the parking fees and tolls therefore have that same private character. A deduction is allowable for parking fees and tolls if the travel is not private, e.g., travel between home and work - transporting bulky equipment (paragraphs 124 to 127).

Protective equipment

92. A deduction is allowable for the cost of protective equipment used at work. Protective equipment includes safety helmets, ear muffs, face masks, gloves, harnesses, goggles, safety glasses, breathing masks, etc. A deduction is not allowable for the cost of prescription glasses or contact lenses, as the expense relates to a personal medical condition and is private in nature.

Repairs to tools and equipment

93. A deduction is allowable under section 53 of the Act for repairs to tools and equipment to the extent to which the tools and equipment are used for income-earning activities.

Self education expenses

94. A comprehensive explanation of the treatment of self education expenses is contained in Taxation Ruling TR 92/8. Key points include:

(a)
A deduction is allowable for self education expenses if the education is directly relevant to the taxpayer's current income earning activities. This particularly applies if a taxpayer's income earning activities are based on skill/knowledge and the education enables him or her to maintain or improve that skill/knowledge.
(b)
A deduction is allowable if the education is likely to lead to an increase in the taxpayer's income from his or her current income earning activities.
(c)
A deduction is not allowable if the education is designed to enable a taxpayer to get employment, to obtain new employment or to open up a new income earning activity (FC of T v. Maddalena 71 ATC 4161; 2 ATR 541).
(d)
Self education includes courses undertaken at an educational institution (whether leading to a formal qualification or not), attendance at work-related conferences or seminars, self-paced learning and study tours.
(e)
Self education expenses include fees, travel expenses (e.g., attending a conference interstate), transport costs, books and equipment.

95. Example: Kim, who recently arrived from overseas, earns her income as an employee cleaner. She is doing a language course to improve her English speaking skills. Kim is not allowed a deduction for the costs of this course as the course is not related to her current income-earning activities. The costs are a private expense connected with Kim's self development even if she was encouraged by her employer to do the course.

96. Example: Jane is an employee cleaner who would like to go into business for herself. She is doing a part-time course in Business Administration. Jane is not allowed any deduction for the costs of this course as the course is not related to her current income earning activities.

97. A deduction is allowable for transport costs in connection with a course of education in the following situations:

(a)
the cost of travel between home and the place of education and then back home;
(b)
the first leg of the trip, if a taxpayer travels from home to the place of education and then on to work (the cost of travelling from the place of education to work is not a self education expense);
(c)
the first leg of the trip, if a taxpayer travels from work to a place of education and then home (the cost of travelling from the place of education to home is not a self education expense);
(d)
the cost of travel between work and the place of education and then back to work.

A summary of items (a) to (d) is contained in the following figure:

deductions allowable for travel in connection with education

98. Example: Frank is a trainee cleaner who travels a long distance to a technical college to undertake a certificate course in Basic Cleaning and Hygiene Technology for two consecutive days each fortnight and sleeps away from home. This course is related to his current income-earning activities. He is allowed a deduction for the cost of travel to and from his place of education, overnight accommodation, meals and incidentals less $250 (see paragraph 101).

99. Example: Robert, a cleaning supervisor, attends a two day conference run by the Australian Liquor, Hospitality and Miscellaneous Workers Union. The conference is designed to keep him abreast of developments in the field of cleaning. The cost of the conference is $500 and this includes the conference fees, travel to and from the conference, as well as accommodation and meals while at the conference location. Robert is allowed a deduction for the full $500.

100. The following expenses related to self education are not allowable under subsection 51(1):

(a)
a Higher Education Contribution Scheme (HECS) payment (subsection 51(6) of the Act); and
(b)
meals purchased by a taxpayer while attending a course at an educational institution other than as part of travel expenses.

Limit on deductibility

101. If self education expenses are allowable under subsection 51(1) of the Act but also fall within the definition of 'expenses of self education' in section 82A of the Act, only the excess of the expenses over $250 is deductible, i.e., the first $250 is not an allowable deduction.

102. 'Expenses of self education' are defined in section 82A of the Act as all expenses (other than HECS payments, Open Learning charges and debt repayments under the Tertiary Student Financial Supplement Scheme) necessarily incurred by a taxpayer in connection with a prescribed course of education. A 'prescribed course of education' is defined in section 82A as a course provided by a school, college, university or other place of education and undertaken by the taxpayer to gain qualifications for use in the carrying on of a profession, business or trade, or in the course of any employment.

103. Example: Frances is a trainee cleaner who incurs self education expenses totalling $1,650 in connection with her course in Basic Cleaning and Hygiene Technology at a technical college. Frances is allowed a deduction for the remaining $1,400.

Technical or professional publications

104. A deduction is allowable under subsection 51(1) of the Act for the cost of buying or subscribing to journals, periodicals and magazines that have a content specifically related to an employee cleaner's work and are not general in nature.

105. In Case P124 82 ATC 629; 26 CTBR (NS) Case 55, an air traffic controller was not allowed a deduction for the purchase of aviation magazines. Dr G W Beck (Member) said (ATC at 633-634; CTBR at 422):


'There might be some tenuous connection between the cost of aviation magazines and the maintenance of knowledge necessary for holding a flying licence...but it seems to me that the possible connection is altogether too remote.'

106. This can be contrasted with Case R70 84 ATC 493; 27 CTBR (NS) Case 124, in which an accountant employed with the Public Service was allowed a deduction for the cost of publications produced by a business and law publisher. The nexus between the expense and the accountant's occupation was established, as the publications contained current technical information that related to her day-to-day work. She was, however, not allowed a deduction for the cost of daily newspapers and periodicals.

107. Example: Warren, a cleaning supervisor, subscribes to Inclean magazine to keep informed of new technology. The cost is an allowable deduction as there is sufficient nexus between the expense and Warren's income-earning activities.

108. Example: Bob is an employee cleaner at an airport and subscribes to The Australian Aviation magazine. The cost is not an allowable deduction as there is insufficient nexus between the expense and Bob's income-earning activities as a cleaner.

Telephone, mobile phone, pager, beeper and other telecommunications equipment expenses

Cost of calls

109. A deduction is allowable for the cost of telephone calls made by an employee cleaner in the course of carrying out his or her duties.

110. Work-related calls may be identified from the itemised telephone account. If such an account is not provided, a reasonable estimate of call costs, based on diary entries of calls made over a period of one month, together with relevant telephone accounts, will be acceptable for substantiation purposes.

Installation or connection costs

111. A deduction is not allowable for the cost of installing or connecting a telephone, mobile phone, pager, beeper or other telecommunications equipment, as it is considered to be a capital expense (see Taxation Ruling IT 85) and/or a private expense.

112. In Case M53 80 ATC 357; 24 CTBR (NS) Case 29, Dr P Gerber (Member) stated (ATC at 359; CTBR at 236):


'...on payment of the connection fee, this taxpayer brought into existence an advantage for the enduring benefit of his newly established medical practice...It follows that it is "like" an expenditure of a capital nature.'

Rental costs

113. The situations where telephone rental will be an allowable deduction, especially for employees, are identified in Taxation Ruling IT 85. It states that taxpayers who are either 'on call' or required to contact their employer on a regular basis may be entitled to a deduction for some portion of the cost of telephone rental.

114. If the telephone is not used 100% for work-related purposes, only a proportionate deduction will be allowable.

115. The proportion can be calculated using the following formula:

Business calls (incoming and outgoing) / Total calls (incoming and outgoing).

Silent telephone number

116. A deduction is not allowable for the cost of obtaining a silent number listing as it is a private expense (Taxation Determination TD 93/115).

Transport expenses

117. Transport costs include public transport fares and the running costs associated with using motor vehicles, motor cycles, bicycles, etc., for work-related travel. They do not include accommodation, meals and incidental expenses (see Travel expenses, paragraphs 145 to 149). The treatment of transport costs incurred by an employee cleaner when travelling is considered below.

Travel between home and work

118. A deduction is not allowable for the cost of travel by an employee cleaner between home and his or her normal work place as it is generally considered to be a private expense. This principle is not altered by the performance of incidental tasks en route (paragraph 34 of Taxation Ruling MT 2027).

119. The High Court considered travel expenses incurred between home and work in Lunney's case. A joint judgment by Williams, Kitto and Taylor JJ stated (CLR at 498-499; ATD at 412-413) that:


'The question whether the fares which were paid by the appellants are deductible under section 51 should not and, indeed, cannot be solved simply by a process of reasoning which asserts that because expenditure on fares from a taxpayer's residence to his place of employment or place of business is necessary if assessable income is to be derived, such expenditure must be regarded as "incidental and relevant" to the derivation of income...But to say that expenditure on fares is a prerequisite to the earning of a taxpayer's income is not to say that such expenditure is incurred in or in the course of gaining or producing his income.'

120. The fact that the travel is outside normal working hours, or involves a second or subsequent trip, does not change this principle. For more information see paragraph 6 of Taxation Ruling IT 2543, Taxation Ruling IT 112 and Taxation Determination TD 93/113.

121. Example: Graham, a cleaning supervisor, is phoned at his home outside normal working hours as the building has been flooded. He travels between his home and the building in response to this emergency. The cost of travel to and from the work place is not an allowable deduction.

122. An employee cleaner may be regularly employed at one work place on some days and at another place on other days. In both cases, the normal work place is where that cleaner performs normal duties.

123. Example: Jack and Bill are cleaners who are employed to clean their employer's head office two days a week and the employer's factory in another suburb on the other days. The travel between home and either of these locations is travel to and from their normal work place. It is private and no deduction is allowable (but see paragraphs 124 to 127).

Travel between home and work - transporting bulky equipment

124. A deduction is allowable if the transport costs can be attributed to the transportation of bulky equipment rather than to private travel between home and work (see FC of T v. Vogt 75 ATC 4073; 5 ATR 274). If the equipment is transported to and from work by the employee cleaner as a matter of convenience, it is considered that the transport costs are private and no deduction is allowable.

125. A deduction is not allowable if a secure area for the storage of equipment is provided at the work place (see Case 59/94 94 ATC 501; AAT Case 9808 (1994) 29 ATR 1232).

126. Example: Charlie is an employee cleaner who uses his car to travel to his work place each day in order to transport a vacuum cleaner, polisher, mop and bucket. There is no secure place at his work place for the storage of his equipment. Because of the bulk of this equipment a deduction is allowable for Charlie's car expenses.

127. Example: Geoffrey, an employee cleaner, carries only his overalls to work in his car. Geoffrey's car expenses are private as his travel from home to work is not attributable to carrying bulky equipment.

Travel between two separate work places if there are two separate employers involved

128. A deduction is allowable for the cost of travelling directly between two work places.

129. Example: Jane works as an employee cleaner for two separate employers. She completes her shift at the first employer's premises before lunch and returns home before she starts her second job later that afternoon. Her travel is between home and work and is not an allowable deduction as it is a private expense.

130. Example: Mary also works for two separate employers. She travels directly from one place of employment to the next place of employment to commence her shift. The cost of this travel is an allowable deduction.

Travel from the normal work place to an alternative work place while still on duty and back to the normal work place or directly home

131. A deduction is allowable for the cost of travel from an employee cleaner's normal work place to other work places. The cost of travel from the alternative work place back to the normal work place or directly home is also an allowable deduction. This travel is undertaken in the performance of the cleaner's duties. It is incurred in the course of gaining assessable income and is allowable as a deduction.

132. Example: David, a cleaning supervisor, travels from his normal work place to his employer's head office to attend a meeting. After the meeting he travels directly home. The cost of each journey is an allowable deduction to David.

Travel from home to an alternative work place for work-related purposes and then to the normal work place or directly home

133. A deduction is allowable for the cost of travel from home to an alternative work place. The cost of travel from the alternative work place to the normal place of employment or directly home is also an allowable deduction (see paragraphs 32 to 35 of Taxation Ruling MT 2027).

134. Example: Janet, an employee cleaner, is required to travel from home to assist with an emergency clean up operation at her employer's head office. She then travels to her normal work place. The cost of travelling from home to the head office and then on to the normal work place is an allowable deduction. However, the cost of travelling home from the normal work place is not an allowable deduction.

Travel between two places of employment or between a place of employment and a place of business

135. A deduction is allowable for the cost of travelling directly between two places of employment or between a place of employment and a place of business. This is provided that the travel is undertaken for the purpose of engaging in income-producing activities.

136. Example: When Abdul finishes work as an employee cleaner, he travels directly to a restaurant to commence work as a cook. The cost of travel from his cleaning job to the restaurant is deductible as the cost is incurred in travelling between two places of employment.

137. If the employee cleaner lives at one of the places of employment or business, a deduction may not be allowable as the travel is between home and work. It is necessary to establish whether the work-related activity carried on at the person's home qualifies the home as a place of employment or business. The fact that a room in the cleaner's home is used in association with employment or business conducted elsewhere will not be sufficient to establish entitlement to a deduction for travel between two places of work (Taxation Ruling IT 2199).

138. A deduction is not allowable for the cost of travel between a person's home, at which a part-time work-related activity is carried on, and a place of full-time employment unless there is some aspect of the travel that is directly related to the part-time activity.

139. In Case N44 81 ATC 216; 24 CTBR (NS) Case 114, a qualified accountant, employed by a firm of accountants, conducted a limited private practice from his home. He set up a separate room in his home as an office. The taxpayer claimed a deduction for car expenses incurred in travelling between his residence/office and his place of employment. The fact that the taxpayer's home was, incidentally, used in the production of income was insufficient to make the travel between his home and his place of employment an outgoing incurred in the production of assessable income. The travel retained its essential character of travel between home and work and therefore it was not an allowable deduction.

140. Example: Virginia is an employee cleaner who teaches guitar at her home on Monday evenings. The cost of travelling from the work place to home is not an allowable deduction. It is a private expense rather than an expense incurred in deriving assessable income.

141. Taxation Rulings IT 2199 and MT 2027 provide further information on the deductibility of travelling expenses between places of employment/business.

Automobile Association/Club membership fees

142. A deduction is allowable for the annual fee for road service if either the log book method or one-third of actual expenses method of claiming work-related car expenses is used. Membership of an Automobile Association/Club usually entitles members to additional benefits such as a magazine and legal advice. These benefits are considered to be incidental to the main purpose of membership, which is the provision of roadside or breakdown service. The entitlement to a deduction for the annual subscription fee is not affected by this arrangement. A deduction is not allowable for a joining fee or for any additional fees paid to gain entitlement to benefits other than road service.

Depreciation cost limit for motor vehicles

143. Section 57AF of the Act imposes a limit on the depreciable cost base of motor vehicles (including station wagons and four-wheel drive vehicles) if the acquisition cost is greater than a specified amount. The depreciable cost base limit applies to both new and second hand vehicles (see Taxation Ruling TR 93/24).

Calculation of motor vehicle balancing adjustment

144. A depreciation balancing adjustment may be necessary on the disposal of a motor vehicle that has been used for work-related activities (see Taxation Ruling IT 2493).

Travel expenses

145. A deduction is allowable for the costs incurred by an employee cleaner in undertaking work-related travel. An example is where that cleaner attends a technical training course interstate. Travel expenses include the costs of accommodation, fares, meals and incidentals.

146. Receipt of an allowance does not automatically entitle an employee cleaner to a deduction for travel expenses. A work-related travel expense must be incurred and only the amount actually spent can be claimed as a deduction.

147. The general rule is that no deduction is allowed for work-related travel expenses unless written evidence, such as a receipt, is obtained. However, special substantiation rules apply to travel expenses if a cleaner receives a travel allowance.

148. If a travel allowance is received and the amount of the claim for expenses incurred is no more than the reasonable amount, substantiation is not required. The Commissioner of Taxation publishes annually a Taxation Ruling that sets out the amount of reasonable expenses covered by a travel allowance.

149. If the deduction claimed is more than the reasonable amount the whole claim must be substantiated, not just the excess over the reasonable amount.

Union or professional association fees and levies

150. A deduction is allowable for the cost of annual union or professional association fees. A deduction is not allowable for fees paid to join a union or professional association as it is a capital expense. Taxation Rulings IT 299, IT 327, IT 2062 and IT 2416 provide further information on the treatment of union and professional association fees.

151. IT 2062 sets out our views on the treatment of levies paid to unions and associations. It says:


'...where levies are paid by employees to a trade union or professional association it is necessary to have regard to the purposes for which the payments are made in order to determine whether they satisfy the terms of subsection 51(1). It is not decisive that the levies may be compulsory. What is important is the connection between the payment of the levy and the activities by which the assessable income of the employee is produced.

Levies made specifically to assist families of employees suffering financial difficulties as a result of employees being on strike or having been laid off by their employers are not considered to be allowable deductions under subsection 51(1) - they are not sufficiently connected with the activities by which the assessable income is produced to meet the requirements of the subsection.'

152. A deduction is allowable for a levy paid to enable a trade union or professional association to provide finance to acquire or construct new premises, to refurbish existing premises or to acquire plant and equipment to conduct their activities (IT 2416).

153. A deduction is allowable for a levy if it is paid into a separate fund and it can be clearly shown that the monies in that fund are solely for protecting the interests of members and their jobs, and for the obtaining of legal advice or the institution of legal action, etc., on their behalf (IT 299). A deduction is not allowable for payments to staff social clubs.

Vaccinations

154. A deduction is not allowable for the cost of vaccinations to protect cleaners at risk from infectious diseases in the work place as the expense relates to a personal medical expense, and is therefore of a private nature.

Alternative views

Telephone installation or connection costs

155. The view was expressed that deductions for telephone installation or connection costs should be allowable based on the Commissioner's stated policy in Taxation Ruling IT 2197. The view of the Commissioner is that IT 2197 only applies when the telephone installation costs or connection fees have a revenue nature. Where these expenses are incurred by an employee, they are not on revenue account but are of a capital or private nature.

Protective clothing and equipment

156. The view was expressed that allowable deductions for 'Protective clothing' and 'Protective equipment' should include sunglasses, sunhats, sunscreens, wet weather gear, etc., that provide protection against the natural environment. This view is not supported by the Commissioner as the expense is a personal or living expense, similar to the cost of travel between home and work, conventional clothing and daily meals. A deduction is allowable for the cost of protective clothing and equipment where the conditions of the work (rather than the natural environment) make it necessary for an employee cleaner to provide protection to his or her person or clothing.

English courses

157. The view was expressed that a deduction should be allowable for the cost of English courses taken by employee cleaners. The Commissioner's view is that the expense is private (see paragraphs 94 and 95).

Vaccinations

158. The view was expressed that the cost of vaccinations should be an allowable deduction. The Commissioner's view is that the expense is private (see paragraph 154).

Index of explanations

159. The following index refers to the paragraph references in the Explanations section of this Ruling:

paragraph
Automobile Association/Club membership fees 142
Car expenses 117
Child care 36
Clothing, uniforms and footwear 39
Protective clothing 41
Occupation specific 49
Compulsory uniforms or wardrobe 51
Non-compulsory uniforms or wardrobe 56
Conventional clothing 58
Laundry and maintenance 64
Compulsory expenses 32
Deductibility of work-related expenses 24
Depreciation of tools and equipment 66
Driver's licence 74
Equipment 66
Fares 117
Fines 77
Food 78
Footwear 39
Laundry 64
Magazines 85
Meals 78
Motor vehicle expenses 117
Newspapers 85
Overtime Meal Expenses 86
Parking fees and tolls 90
Private expenditure 28
Professional publications 104
Protective clothing 41
Protective equipment 92
Repairs to equipment 93
Self education expenses 94
Allowable expenses 94
Transport costs 97
Non-allowable expenses 100
Limit on deductibility 101
Substantiation 34
Technical or professional publications 104
Telephone expenses
Cost of calls 109
Installation or connection costs 111
Rental costs 113
Silent numbers 116
Tolls 90
Tools 66
Transport 117
Between home and work 118
Carrying bulky equipment to and from work 124
Between work places (different employers) 128
Between normal and alternative work places 131
Between home and alternative work place 133
Between two places of employment 135
Travel expenses 145
Travel allowance 147
Uniforms 39
Union fees and levies 150
Vaccinations 154
Voluntary expenses 30
Wet weather gear 45

Commissioner of Taxation
1 June 1995

Previously released in draft form as TR 95/D1

References

ATO references:
NO 94/8180-0

ISSN 1039 - 0731

Related Rulings/Determinations:

IT 85
IT 112
IT 299
IT 327
IT 2062
IT 2084
IT 2197
IT 2198
IT 2199
IT 2416
IT 2452
IT 2477
IT 2493
IT 2543
IT 2641
IT 2685
MT 2027
TR 92/8
TR 92/15
TR 93/24
TR 94/3
TR 94/22
TD 92/142
TD 92/154
TD 92/157
TD 93/108
TD 93/113
TD 93/115
TD 93/145
TD 93/230
TD 93/232
TD 93/244

Subject References:
- allowable deductions
- allowances
- car expenses
- child care expenses
- cleaners
- clothing
- conventional clothing
- corporate wardrobe
- deductible expenses
- depreciation
- driver's licence
- fares
- fines
- footwear
- glasses
- laundry
- levies
- living away from home allowances
- meals
- motor vehicles
- newspapers
- professional associations
- protective equipment
- repairs
- self education expenses
- subscriptions
- substantiation
- sunscreens
- technical publications
- telephone expenses
- tolls
- tools
- transport
- travel expenses
- uniforms
- union fees
- vaccinations

Legislative References:
- ITAA 25(1)
- ITAA 26(e)
ITAA 26(eaa)
- ITAA 51(1)
- ITAA 51(4)
- ITAA 51(6)
- ITAA 51AGA
- ITAA 51AH
- ITAA 51AL
- ITAA 51AL(26)
- ITAA 53
- ITAA 54
- ITAA 54(1)
- ITAA 55
- ITAA 55(8)
- ITAA 61
- ITAA 82A

Case References:
Charles Moore & Co (WA) Pty Ltd v. FC of T
(1956) 95 CLR 344
11 ATD 147
6 AITR 379


FC of T v. Cooper
(1991) 29 FCR 177
91 ATC 4396
(1991) 21 ATR 1616

FC of T v. Edwards
(1994) 49 FCR 318
94 ATC 4255
(1994) 28 ATR 87

FC of T v. Hatchett
(1971) 125 CLR 494
71 ATC 4184
2 ATR 557

FC of T v. Maddalena
71 ATC 4161
2 ATR 541

FC of T v. Vogt
75 ATC 4073
5 ATR 274

Jayatilake v. FC of T
(1991) 101 ALR 11
91 ATC 4516
(1991) 22 ATR 125

Lodge v. FC of T
(1972) 128 CLR 171
72 ATC 4174
3 ATR 254

Lunney v. FC of T;Hayley v. FC of T
(1958) 100 CLR 478
[1958] ALR 225
11 ATD 404
7 AITR 166

Roads and Traffic Authority of NSW v. FC of T
(1993) 43 FCR 233
93 ATC 4508
(1993) 26 ATR 76

Ronpibon Tin NL v. FC of T
(1949) 78 CLR 47
8 ATD 431
4 AITR 236

Case T47 / Case 56
18 TBRD (NS) 242
14 CTBR (NS) 306

Case M53 /Case 29
80 ATC 357
24 CTBR (NS) 234

Case N44 / Case 114
81 ATC 216
24 CTBR (NS) 915

Case N84 / Case 43
81 ATC 451
25 CTBR (NS) 305

Case P30 / Case 94
82 ATC 139
25 CTBR (NS) 696

Case P114 / Case 47
82 ATC 586
26 CTBR (NS) 365

Case P124 / Case 55
82 ATC 629
26 CTBR (NS) 416

Case Q11 Case 75
83 ATC 41
26 CTBR (NS) 522

Case R49 / Case 104
84 ATC 387
27 CTBR (NS) 836

Case R55 / Case 109
84 ATC 411
27 CTBR (NS) 867

Case R62 / Case 113
84 ATC 454
27 CTBR (NS) 913

Case R70 / Case 124
84 ATC 493
27 CTBR (NS) 981

Case U80
87 ATC 470

Case U95
87 ATC 575

Case Y8
91 ATC 166

AAT Case 6587
(1991) 22 ATR 3037

Case Y43
91 ATC 412

AAT Case 7273
(1991) 22 ATR 3402

Case 48/94
94 ATC 422

AAT Case 9679
(1994) 29 ATR 1077

Case 59/
94 ATC 501

AAT Case 9808
(1994) 29 ATR 1232