Edited version of private ruling

Authorisation Number: 1011579190594

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Ruling

Subject: Home to work travel

1. Are you entitled to a deduction for travel between your home and your parent's post office box?

No.

2. Are you entitled to a deduction for the travel between the post office and your parent's home where you conduct some of your income earning activities?

No.

3. Are you entitled to a deduction for travel between your home and your parent's home?

No.

This ruling applies for the following period

Year ending 30 June 2010

The scheme commences on:

1 July 2009

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.

All of your financial records are kept at your parent's house.

All of your correspondence goes to your parent's post office.

You work one day a week (on average) as an employee.

You occasionally see a client at your home (it is a registered place of business).

You have several rental properties.

You have many shareholdings in different companies.

On days when you are not working as an employee, you go to your parent's house.

At your parent's house you:

· Deal with all payments of accounts for your rental properties (you have an agent to select tenants and collect the rent) including council rates, water rates, insurance and body corporate

· Deal with your share portfolio, keeping correct records for capital gains tax as the majority of the dividends are share investment plans

· Read the company annual reports for each company

· Check bank statements with respect to rents received, dividends taken in the form of cash and interest received

· Prepare your tax return

· Read information relevant to your employment

· Read the financial and real estate sections of the daily newspapers.

You do not use a computer for any record keeping.

You do not have a break up of time spent on any particular aspect of your portfolio or your profession.

You drive your own vehicle.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 8-5

Income Tax Assessment Act 1997 Section 12-5

Income Tax Assessment Act 1997 Section 6-5.

Reasons for decision

Summary

Home to work travel is considered to be a private expense. In your case, your travel to your parent's house is a matter of choice. You choose to leave your home which is a registered place of business to travel to your parent's house where you choose to pursue aspects of your other income producing activities. Your parent's house is not a place of work, therefore your travel expenses are not deductible.

Detailed reasoning

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and 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.

Section 8-5 of the ITAA 1997 deals with specific deductions, and allows deductions where an amount can be deducted under a specific provision other than within Division 8 of the ITAA 1997.

Section 12-5 of the ITAA 1997 lists those provisions dealing with specific deductions. Included in this list is Division 28 of the ITAA 1997 which deals with car expenses. Division 28 of the ITAA 1997 sets out the rules for working out deductions for car expenses if you own or lease a car.

There are four different methods of calculating car expenses deductions. To be eligible to claim a deduction for car expenses, Division 28 of the ITAA 1997 requires that there must be business kilometres (that is, kilometres the car travelled in the course of producing your assessable income or for travel between work places).

In considering whether you are entitled to a deduction for car expenses, it is necessary to consider whether the expenses are incurred in travelling in the course of producing your assessable income.

Travel between home and work

A deduction is generally not allowable for the cost of travel by an employee between home and their normal workplace as it is considered to be a private expense (Lunney v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 ATR 166 (Lunney's Case) Taxation Ruling 112).

In Lunney's case, it was held that fares paid by taxpayers to enable them to go day by day to their regular place of employment or business and back to their home are not deductible against the assessable income earned by them from their employment or business. In a joint judgment, Williams, Kitto, and Taylor JJ stated (CLR at 498 - 499; ATD at 412 - 413)):

It is, of course, beyond question that unless an employee attends at his place of employment he will not derive assessable income and, in one sense, he makes the journey to his place of employment in order that he may earn his 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.

The cost of travelling between home and work is generally incurred to put the employee in a position to perform duties of employment, rather than in the performance of those duties. This principle is not altered by the performance of incidental tasks en route (paragraph 34 of Taxation Ruling MT 2027) or use of a car because using public transport is impracticable.

Expenses of travelling between home and a place of work are generally not deductible. However, a deduction may be allowed in certain exceptional circumstances, for example, where the taxpayer's job is itinerant, or where the taxpayer is required to carry bulky equipment to work. These two exceptions are discussed below.

Employment duties of an itinerant nature

A deduction is allowable for the cost of travel between home and work for an employee who is engaged in itinerant work.

The question of whether an employee's work is itinerant is one of fact, to be determined according to individual circumstances. It is the nature of each individual's duties and not their occupation or industry that determines if they are engaged in itinerant work. Further, itinerant work may be a permanent or temporary feature of an employee's duties.

Taxation Ruling TR 95/34 provides guidelines for establishing whether an employee is carrying out itinerant work. The ruling states that the following characteristics are indicators of itinerancy:

· travel is a fundamental part of the employee's work

· the existence of a 'web' of work places in the employee's regular employment, that is, the employee has no fixed place of work

· the employee continually travels from one work site to another. An employee must regularly work at more than one work site before returning to his or her usual place of residence.

Travel is a fundamental part of an employee's work

For the travel to be a fundamental part of an employees work, travel must be an essential feature of an employees duties (paragraph 22 TR 95/34).

Travel in your own personal vehicle is not a fundamental part of your employment.

Web of work places

A web of work places exists when an employee earns the income by performing his or her duties at several work sites before returning home. In FC of T v. Wiener 78 ATC 4006; (1978) 8 ATR 335 (Wiener's Case), the taxpayer was required to teach at four to five schools each day. Her duties for the day involved travelling in her own vehicle between the schools to instruct pupils at different schools. This constituted a web of work places because the travel was a fundamental part of her work. Travelling between schools was part of her duties for the day.

This situation is contrasted with Case U97 87 ATC 584; AAT Case 68 (1987) 18 ATR 3491 (Case U97), where the taxpayer was not considered to be an itinerant worker. In that case, the taxpayer was employed as a fireman. He was attached to a fire station located close to his home in a northern suburb of Sydney, but for some years worked as a relief fireman. In that capacity, he was commonly sent to other fire stations in the Sydney fire district. The taxpayer drove his own car each day to and from the outer station to which he had been allocated, or, if there was no such allocation, to and from his home station. Once having arrived at his outer station, he remained there until the end of his shift before returning home. The only distinguishing feature of his claim was that he travelled to one outer station regularly for a number of days then another outer station for another period.

It was held that the settled pattern of the taxpayer's employment could not be regarded as itinerant, even though he was not required to serve at the same station every day. In deciding that the taxpayer was not itinerant, Senior Member McMahon stated (ATC at 588; ATR at 3495 - 3496):

There is not the web of workplaces that one looks for as a structure for the applicant's working life if that life is to be regarded as itinerant. There is not the constant unsettled dispatch from one workplace to another

In your case, you travel to your parent's home on the days you are not employed, this is not sufficient to constitute a web of work places for itinerancy as your parent's house is not a place of employment.  

We do not consider the nature of your duties to be itinerant as travel in your own vehicle is not a fundamental part of your work. You travel to your parent's house to undertake professional and portfolio activities which you choose to undertake at that location. This does not constitute a 'web of workplaces'.

Bulky equipment

A deduction may be allowable if the transport costs can be attributed to the transportation of bulky equipment necessary for employment rather than to private travel between home and work (FC of T v. Vogt 75 ATC 4073; (1975) 5 ATR 274) (Vogt's Case). If the equipment is transported to and from work as a matter of convenience or personal choice, it is considered that the transport costs are private and no deduction is allowable. A deduction is also not allowable if a secure area for the storage of the equipment is provided at the work place.

The question of what constitutes 'bulky equipment' must be considered according to the individual circumstances in each case.

The leading case on the transportation of bulky equipment is Vogt's Case. In this case the taxpayer was allowed the cost of using his car to transport bulky musical instruments to clubs where he performed. Justice Waddell held at page 4078 that:

the essential character of the expenditure was such that it should be regarded as having been "incurred in gaining or producing the assessable income".

You do not transport bulky tools.

Travel between workplaces

The travel from your place of residence to your parent's house via the post office and return is considered to be private travel. Therefore, because it is private in nature you cannot claim a deduction. The travel puts you in a position to perform the various tasks relating to your income earning activities which you choose to do at your parent's house.

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