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Edited version of private ruling

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Ruling

Subject: Rental expenses

Question:

Can you claim a deduction for your rental expenses incurred where your employer requires you to stay at work?

Answer:

No.

This ruling applies for the following period:

Year ended 30 June 2010

The scheme commenced on:

1 July 2009

Relevant facts and circumstances

You are working as a Boarding Coordinator in a boarding school. 

You are required to reside on campus in accommodation provided by your employer as you need to be accessible to other supervisors and students in your care 24 hours a day.

You are charged rent.

You do not maintain another residence. You sold your family home and your family stays with you in the accommodation provided by your employer.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

Summary

You are not entitled to a deduction for the rental expenses incurred in staying in the boarding school as these expenses are considered to be private in nature.

Detailed reasoning

Section 8-1 of the Income Tax Assessment Act 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.

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 (Roads and Traffic Authority Case)).

In FC of T v. Charlton 88 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.

Your situation can be distinguished from above cases as you do not maintain another residence and as such you are not living away from home. You sold your family home and relocated your family to live with you in the boarding school.

Taxation Ruling TR 98/9 explains that expenditure on accommodation will not be allowable as an employment-related deduction where a taxpayer has travelled to another location and has established a new home. Hill J in the Roads and Traffic Authority Case supports this view and states that:

'An employee who had no private home and was employed indefinitely to work at a particular site and did in fact work for the whole of his employment at that site, might be said to have chosen to live at the site so that the cost of his accommodation there would be private.'

Although, TR 98/9 deals with deductibility of self-education expenses, it outlines key factors to be taken into account in determining whether a new home has been established. Two important factors that are relevant in your case are:

It is acknowledged that you are required to reside in the campus due to the nature of your employment and you incur rental expenses as a result of this requirement. However, the accommodation provided to you by your employer is considered your new home and as such any expenses associated with living in this accommodation is considered to be a private or domestic in nature. Accordingly, you are not entitled to a deduction for the rental expenses incurred while staying in the boarding school.

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