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Edited version of private ruling

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Ruling

Subject: Work related expenses

Are you entitled to claim the costs of running a motor vehicle for work related purposes if you carry bulky equipment?

Yes.

This ruling applies for the following period:

Year ending 30 June 2011

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

You are a manual worker.

You work in the mining industry.

You carry bulky equipment.

This equipment weighs a considerable amount.

You work at different sites.

You are required to use your own tools.

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.

Reasons for decision

The deduction provisions are contained in Division 8 of the Income Tax Assessment Act 1997 (ITAA 1997). Section 8-1 of the ITAA 1997 deals with general deductions and allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income, except to the extent that they are outgoings 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 of the ITAA 1997, other than within Division 8.

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 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).

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

The case of Lunney v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 ATR 166 settled the principle that travel to and from work is ordinarily not deductible. The Full High Court held that 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 travel is considered to be of an essentially private or domestic nature.

However, the Commissioner accepts that expenses incurred by employees in travelling to and from work are deductible in certain circumstances. One of the exceptions to the general view is where the employee is required to transport bulky equipment necessary for employment. Paragraphs 63 and 64 of Taxation Ruling TR 95/34 explain that a deduction may be allowed in circumstances where:

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

In Crestani v. FC of T 98 ATC 2219; (1998) 40 ATR 1037 (Crestanis Case), a toolbox which measured 57 x 28 x 25 centimetres and weighed 27 kilograms was considered as bulky, in the sense of cumbersome, and the transport cost was attributable to the transportation of such bulky equipment rather than private travel between home and work. The employer did not provide a secure storage area for the toolbox and the use of public transport was not a viable option.

In your case, it is a work requirement that you provide and carry your equipment with you in order to perform your duties at each work site.

To determine whether the tools you carry are bulky is a question of fact and degree and consideration must be given to the size and weight of the equipment.

You have a toolbag -. weight approx 50kg and a tool box -. Weight 20kg

You carry a range of tools in addition to the above tool bag and tool box.

This equipment combined is significantly larger than the toolbox considered in Crestanis Case and is consequently considered as bulky equipment.

Therefore, you are entitled to claim a deduction for travel expenses incurred when transporting your bulky equipment from home to work. Consequently, the car expenses deduction is allowable using any of the four methods contained in Division 28 of the ITAA 1997.

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