ATO Interpretative Decision

ATO ID 2001/44

Income Tax

• This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Can a taxpayer, a geologist, claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 for weekly expenses incurred in travelling the substantial distance from the taxpayer's place of residence to a place of employment (a remote base camp) and back again?

Decision

The expenses incurred by the taxpayer in travelling to the base camp and back again are not deductible under section 8-1 of the Income Tax Assessment Act 1997 because these expenses are of a private nature.

Facts

A taxpayer, a geologist, works for a mining company. The taxpayer works on a one week on/one week off basis. At the beginning and end of each one week working period the taxpayer personally incurs expense in travelling to and from the remote base camp from which the taxpayer works. In travelling to the base camp, the taxpayer takes tools and equipment needed for work purposes such as microscopes and rock hammers. During each working period, the taxpayer frequently travels large distances from the base camp on a daily basis.

While at the place of residence, the taxpayer undertakes a few hours of work per week connected with the taxpayer's work for the mining company.

Reasons For Decision

Generally the expenses of travel to and from work are not deductible. The essential purpose of much home to work travel is not to enable a taxpayer to derive assessable income; that such expenses are incurred is a necessary consequence of living in one place and working in another (Lunney & Haley v FC of T (1958) 100 CLR 478). The mode of transport, the availability of transport, the lack of suitable public transport, erratic times of employment, time of travel, distance of travel, frequency of travel and necessity of travel all are factors which do not alter the essential character of travel between home and work as private in nature (Case V111 88 ATC 712, Taxation Ruling IT 2543).

However, the Commissioner accepts that expenses incurred by employees in travelling from home to work are deductible under section 8-1 of the Income Tax Assessment Act 1997 in some limited circumstances.

Taxation Ruling IT 2543 and Taxation Ruling MT 2027 detail the circumstances under which travelling expenses between home and work may be allowed as a deduction.

The taxpayer does not satisfy the requirements for deductibility of home to work travel on the basis of itinerancy (Taxation Ruling TR 95/34 and Taxation Ruling MT 2027). Travel is fundamental to the taxpayer's work once the taxpayer arrives at the base camp. However, regular travel via the same route from the taxpayer's place of residence to the base camp is not fundamental to the taxpayer's work. The travel is instead putting the taxpayer in a position to undertake the work. The taxpayer travels on an itinerant basis (that is from place to place) in the course of the job only after arriving at the base camp from the place of residence and only until the point of the taxpayer's departure from the camp to the place of residence.

Whether an employee's home is considered to constitute a base of operation depends on the nature and the extent of the activities undertaken by the employee at home (Taxation Ruling TR 95/22). The work undertaken by the taxpayer at homes averages only a few hours a week, the tasks undertaken at home are not tasks which could not be done at the work site, the need to do work at home does not arise due to the special nature of the taxpayer's employment. That is, the taxpayer's home is not the taxpayer's base of operations.

Finally, the fact that the taxpayer carries certain tools and equipment required for day-to-day work duties between the work site and the place of residence does not make the travelling expenses incurred by the taxpayer deductible: the expenses incurred by the taxpayer are in a practical sense attributable to the taxpayer's travel to the base camp rather than merely to the carriage of the tools (FC of T v Vogt 75 ATC 4073; 5 ATR 274, Taxation Ruling IT 112).

Legislative References:
Income Tax Assessment Act 1997
   subsections 8-1(1)
   subsections 8-1(2)

Case References:
Lunney & Haley v FC of T
   (1958) 100 CLR 478

Related Public Rulings (including Determinations)
IT 112
IT 2543
TR 95/22
TR 95/34
MT 2027

Keywords
Overseas education expenses
Self education expenses

Business Line:  Small Business/Individual Taxpayers

Date of publication:  4 June 2001

ISSN: 1445-2782