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Edited version of private ruling
Authorisation Number: 1011586611919
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Ruling
Subject: Accommodation expenses
Question:
Are you entitled to a deduction for rental expenses?
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 a night caretaker.
You are required to be available at any time during the night.
You decided to hire an onsite apartment.
You are charged a reduced rate of rent.
You have no other residential premises.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1.
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for all outgoings to the extent to which they are incurred in gaining or producing assessable income, or are necessarily incurred in carrying on a business for that purpose. However, a deduction is not allowable for outgoings that are of a capital, private or domestic nature.
Generally, accommodation expenses are private in nature and are not deductible.
However, in Lunney v. FC of T (1958) 100 CLR 478 the Full High Court set out the principle that for a deduction to be allowable it is not enough for the expenditure to be an essential prerequisite to the derivation of assessable income.
In that case it was held that the costs incurred by a taxpayer in travelling to the place where they work are expenses incurred in order to enable them to earn income but are not expenses incurred in the course of earning that income.
The issue of expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location was considered in FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 (Toms' Case).
In Toms' Case, the taxpayer was a forest worker who during the working week lived in a caravan in a bush camp 108 kilometres from his family home in Grafton. He claimed it was too far to travel each day to his work in the forest, so that it was necessary to establish a caravan at the camp. He would return home on weekends. He claimed the costs of maintaining his caravan and other living expenses such as the cost of heating and lighting.
The Federal Court considered that the caravan was rendered necessary as much by the taxpayer's choice of the place of his residence in Grafton as by his choice of employment in the forest, and its purpose was to enable him to retain his residence at Grafton although employed in the forest. It was held that the expenses incurred in relation to the temporary accommodation near the workplace while maintaining a family residence in another location were dictated not by his work but by private considerations, and therefore were not deductible.
In your case, you incur expenses for renting accommodation to enable you to live on site at your work place.
You made a decision to live onsite so that you could meet your employment requirements to be available at all times during the night.
Although the rent expenses would not be incurred but for your employment, the expenses are a prerequisite to the earning of income rather than being incurred in the course of earning that income.
Furthermore, you were not specifically required to live onsite as part of your employment, and as such your choice to do so is considered a private consideration to make it easier for you to do your work, rather than a requirement of your employment.
Therefore, the rent expenses are not incurred in the course of gaining or producing assessable income and they are also private and domestic in nature. As such you are not entitled to a deduction for the rental expenses.
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