Edited version of private ruling

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Ruling

Subject: Accommodation expenses

Can you claim a deduction for accommodation expenses incurred while working away from home for a period?

No.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You carry on a business as a sole trader. During the income year, you worked away from home, for a period. You paid for accommodation.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) states you can deduct from your assessable income any loss or outgoing that is incurred in gaining or producing your assessable income or is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.

However, section 8-1 of the ITAA 1997 states a loss or outgoing is not deductible if it is of a capital, private or domestic nature.

As a general rule, expenditure on accommodation while living away from home cannot be deducted. These outgoings are essentially 'living expenses' of a private or domestic nature. Accommodation expenses enable a taxpayer to stay in proximity to their work place and arrive at work on time. Accommodation expenses are a prerequisite to the earning of assessable income rather than expenses incurred in the course of gaining or producing that income. In the court case Ricketts v. Colquhoun (1926) 10 TC 118, it was observed at p 134:

A man must eat and sleep somewhere, whether he has or has not been engaged in the administration of justice. Normally he performs those operations in his own home, and if he elects to live away from his work so that he must find board and lodging away from home, that is by his own choice, and not by reason of any necessity arising out of his employment; nor does he, as a rule, eat or sleep in the course of performing his duties, but either before or after their performance.

Similarly, in the High Court case Federal Commissioner of Taxation v. Green (1950) 81 CLR 313, at pp 317-318, the court observed:

…it is perfectly reasonable and proper for a taxpayer to incur living expenses and many expenses of a private or domestic nature but such expenditure is expressly excluded from deductibility by the final words of the first sub-section of section 51. Thus... a taxpayer cannot deduct ordinary living expenses. It is true that such expenses are necessarily incurred if any income is to be earned or otherwise derived, but such expenses would be incurred whether income was earned or otherwise derived or not.

The body of case law includes many examples of where deductions for accommodation expenses were disallowed, which include the following:

A real estate agent, who lived 25 miles out of the city and conducted a business in the city and suburbs, was denied a deduction for the cost of lodging at a city club during the week to facilitate the operation of the business (8 TBRD Case H104).

Following their retirement, a pathologist assisting the local coroner at Bendigo, a country town some 150km from the family home, was denied a deduction for the rental of a flat in the town where he stayed overnight after doing autopsies (FC of T v. Charlton 84 ATC 4415; (1984) 15 ATR 711).

Each Monday, a forest worker drove by four-wheel drive vehicle 108km to a forest campsite and occupied a caravan until the following Friday, when the worker returned to the family home. The Federal Court disallowed a deduction for the cost of maintaining the caravan and other living expenses and ruled the taxpayer incurred the expenses in providing temporary accommodation because the taxpayer had chosen to reside at a place so far from where it was necessary to be in order to gain income. The expenses were dictated not by work but by private considerations (FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466).

A clerk employed by a public authority and promoted to a position in a country town, away from family, was disallowed rent paid on a cottage (Case K29, 78 ATC 281).

However, the body of case law has established a number of exceptions to the general rules stated above, which include the costs of accommodation incurred while travelling in the course of work.

Regarding these exceptions, in the case of Nolder v. Walters (1930) 15 TC 380, it was observed, at p 388:

Some offices and employments do involve the duty of travelling. It is not a question of getting to the place of employment, but the employment may be actually to travel, as in the common case of the commercial traveller, and, as some people say, in the case of the Member of Parliament... I think it always has been agreed, that when you get a travelling office, so that travelling expenses are allowed, those travelling expenses do include the extra expense of living which is put upon a man by having to stay at hotels and inns, and such places, rather than stay at home. Of course his board and his lodging in a sense, eating and sleeping, are the necessities of a human being, whether he has an office, or whether he has not, and therefore, of course, the cost of his food and lodging is not wholly and exclusively paid out in the performance of his duties, but the extra part of it is... In this case, therefore, he would be entitled to charge something for the extra expense which he is put to by having to go and spend all the day, and often the night, away from home, because that is part of his duty; and then it comes to the question really of quantum.

Examples of where deductions for accommodation were allowed include:

No. 1 Board of Review Case H37 (1976), 76 ATC 312 at p 317, where it was indicated that cane-cutters, shearers, railway linesmen and judges on circuit, etc, may in some situations constitute a 'travelling office'.

No. 3 Board of Review Case 81 (1951) 1 TBRD, where tour living expenses comprising hotel accommodation and meals were allowed to a visiting self employed entertainer on a 22-week concert tour of Australia, her home being in England.

No. 1 Board of Review Case E34 (1954) 5 TBRD, where a Sydney based opera singer who maintained a flat in that city while employed on a 26 week tour of three states was allowed her hotel and meal expenses.

Miscellaneous Taxation Ruling MT 2030 discusses the differences between living-away-from-home allowances and travelling allowances in relation to employees. Although you are not an employee, the principles found in MT 2030 can be applied to your case.

A living-away-from-home allowance is paid where the employee has moved and taken up temporary residence away from his or her usual place of residence so as to be able to carry out employment duties for a time at the new (but temporary) workplace. There is a change of job location and an actual change of residence to a place at or near that location. A deduction is not allowed for accommodation expenses as the employee is not travelling in the performance of their duties.

A travelling allowance is paid where the employee is travelling in the course of performing his or her job (for example, a travelling salesperson). Here, the employee does not change job and residential locations but simply travels in order to carry out the requirements of the job. Travelling allowances form part of the employee's assessable income against which appropriate deductions may be allowed for the cost of meals, accommodation and incidental expenses incurred while the employee is travelling in the course of carrying out the duties of employment.

Paragraph 41 of MT 2030 states there will be circumstances, however, when an employee is away from his or her home base for a brief period in which it may be difficult to conclude whether the employee is living away from home or travelling. As a practical general rule, where the period away does not exceed 21 days the allowance will be treated as a travelling allowance rather than a living-away-from-home allowance.

In your case, it is considered that you were living away from home rather than travelling in the course of undertaking your business activities. This is because you away from your home, for a period in excess of three weeks. This period of time far exceeds the 21 day guidance in MT 2030. It follows you cannot claim a deduction for your accommodation expenses under section 8-1 of the ITAA 1997. Your accommodation expenses were private in nature.

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