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Edited version of private ruling

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Ruling

Subject: Accommodation expenses

Are you entitled to claim a deduction for accommodation expenses?

No.

This ruling applies for the following periods

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

You are a specialist.

You are employed three days a week in state A.

Your employer pays you reasonable travel allowance for food and incidentals for the days you work in state A.

You reside in state B.

You rent private accommodation for the three days you are in state A.

You pay rent for accommodation and utilities for the three days you are in state A.

Your employer does not pay you an allowance for accommodation.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

A deduction is allowable 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, or relate to the earning of exempt income.

Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example unless one arrives at work it is not possible to derive income. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income. Rather, the expenses are incurred to enable the taxpayer to commence income earning activities.

As a general rule, expenditure on meals and accommodation while working away from home is not allowed as a deduction. These costs are essentially 'living expenses' of a private or domestic nature. The fact that income cannot be earned unless certain expenses are necessarily incurred is not determinative of deductibility. The costs of maintaining a second home in a place the taxpayer regularly visits on business are unlikely to be deductible.

In FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 the Federal Court disallowed a forest worker's deduction for the cost of maintaining a caravan and other living expenses. The taxpayer incurred the expenses in providing temporary accommodation at the base camp because the taxpayer had chosen to reside at a place far from the worksite. These expenses were dictated not by work but by private considerations.

In this case, the taxpayer's meals, accommodation (running and depreciation expenses associated with the caravan, plus interest paid on the loan used to acquire the caravan) and incidental expenses do not have a sufficient connection with his income producing activities. The extra expenses of food and accommodation are considered to be of a private and domestic nature as the taxpayer chooses the location of their normal place of residence.

In your case:

Therefore, the expenses associated with your accommodation in state A are considered private or domestic in nature. Consequently, you are not entitled to a deduction for these expenses.

Further Information

Receiving an allowance from your employer does not automatically entitle you to a deduction. To claim a deduction you must have included the whole of the allowance on your tax return and incurred the expense, and it must be related to your work as an employee.

As we have determined that your accommodation is not a work related expense, similarly, the travel allowance you receive from your employer is not considered a work related expense. The allowance should be included on your payment summary and should also be included in your tax return as an allowance.

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