ATO Interpretative Decision

ATO ID 2002/427 (Withdrawn)

Income Tax

• This ATO ID is withdrawn. Tax Determination TD 93/230 provides the ATO view covering deductibility for these types of expenses.
  This document has changed over time. View its history.

Issue

Can the taxpayer claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for their rental expenses incurred while boarding at work?

Decision

Yes. The taxpayer can claim a deduction under section 8-1 of the ITAA 1997 for their rental expenses incurred while boarding at work as the taxpayer's employer requires the taxpayer to reside away from home for periods of time and thus the expense is employment related.

Facts

The taxpayer is employed as a boarding school house-parent.

The taxpayer is required by their employer to reside at the school in accommodation provided by the school during the school week. This is to ensure the overnight security, safety and well-being of students who board at the school.

The school provides the taxpayer with accommodation for which the taxpayer is charged rent.

The taxpayer returns to their own home on their days off and occasionally visits their home during the school week.

Reasons for Decision

Section 8-1 of the ITAA 1997 allows a deduction for all losses or 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.

As a general rule, the cost of accommodation is not tax deductible, as it is essentially a living expense which is considered to be a private or domestic outgoing (FC of T v. Green (1950) 81 CLR 313).

However, where a taxpayer is required by his or her employer to reside for periods of time, away from home and at the work site, and that employee incurs expenditure for the cost of sustenance, the expense takes on the character of being business or employment related (Roads and Traffic Authority of NSW v. FC of T 93 ATC 4508; (1993) 26 ATR 76).

In FC of T v. Charlton 84 ATC 4415; 15 ATR 711, Crockett J expressed the opinion that in order for accommodation expenses to be deductible, there must be something in the nature of the work that demands the taxpayer stay in the accommodation.

The taxpayer's duties and terms of employment require the taxpayer to remain at the school during school weeknights. The nature of the taxpayer's employment demands the taxpayer stay in the accommodation. The taxpayer maintains their own home and spends their time away from work at their private home.

The taxpayer is required by their employer to reside away from home for periods of time. The taxpayer incurs rental expenses as a result of this requirement. As the nature of the taxpayer's employment demands the taxpayer stay in the particular accommodation, the rental expense is employment related in character.

Accordingly, the taxpayer can claim a deduction under section 8-1 of the ITAA 1997 for rental expenses incurred while staying at the boarding school.

Amendment History

Legislative References:
Income Tax Assessment Act 1997
   section 8-1

Case References:
Taxation, Federal Commissioner of v. Green
   81 CLR 313
   57 ALR 531
   24 ALJR 303
   4 AITR 471

Keywords
Deductions & expenses
Accommodation expenses

Business Line:  Small Business/Individual Taxpayers

Date of publication:  12 April 2002

ISSN: 1445-2782