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Ruling

Subject: Work related car expenses

Question and answer:

Are you entitled to claim a deduction for car expenses incurred in travelling between home and site Y?

No.

This ruling applies for the following periods:

Year ended 30 June 2010

The scheme commenced on:

1 July 2009

Relevant facts:

You are employed by an organisation that has several workplaces in different locations.

Your contract states that your place of employment is site X.

Your regular place of employment was site X.

New staffing arrangements were introduced in mid-2009 which required you to work most days each week at site X and the remainder at site Y.

You have worked at these two sites on a regular basis since the beginning of the 2009/10 income year.

Site Y is more than 50 kilometres from your home.

You travel this distance in your own car.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Division 28

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) generally allows a deduction for any loss or outgoing to the extent that it is incurred in gaining or producing assessable income.

In relation to car expenses, there are specific rules that must be followed in order to claim a deduction, which can be found in Division 28 of the ITAA 1997. Section 28-12 of the ITAA 1997 provides that you must use one of four methods to calculate the amount of deduction: that is, the cents per kilometre, 12% of original value, one-third of actual expenses and the log book methods. Each method requires you to travel business kilometres, that is, kilometres the car travelled in the course of producing your assessable income or between workplaces.

It is settled law that expenditure incurred in travelling to and from the normal workplace is not deductible as it is not incurred in, or in the course of, gaining or producing the assessable income (Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478). The general rule, as discussed in Taxation Ruling IT 112 Deductibility of travelling expenses between residence and place of employment or business, is that travel between home and a person's regular place of employment or business is ordinarily private travel. While travel to work is a necessary pre-requisite to earning income, it is not undertaken in the course of earning that income.  Any expenses related to such travel are incurred at a point too soon to have the necessary connection with gaining or producing assessable income.

In your case, the travel from home to site Y is considered to be private travel and the expenses incurred at a point too soon. However, expenses incurred in travelling from home to an alternative workplace may be deductible. Therefore, we need to consider whether site Y constitutes an alternative workplace, whereby travel to the site is considered to be made on work, or whether it merely represents another regular workplace in which travel is required to get to work. Miscellaneous Tax Ruling MT 2027 Fringe benefits tax: private use of cars: home to work travel states that an alternative workplace is a secondary workplace that is not a regular place of employment.

Whilst the issue of what constitutes an alternative workplace will be dependant on the individual facts of the case, the features that may be taken into consideration as to what will characterise an alternative workplace are discussed in paragraphs 28 to 36 of MT 2027 and include: 

· the short term or temporary duration of the work undertaken there

· the irregularity of the visits to the place, and

· the absence of any regular pattern of travel to the place.

MT 2027 provides three principles for determining whether expenses incurred in travel from home to an alternative workplace are deductible. These three principles are:

· the employee has a regular place of employment to which he or she travels habitually

· in the performance of his or her duties as an employee, travel is undertaken to an alternative destination which itself is not a regular place of employment, and

· the journey is undertaken to a location at which the employee performs substantial employment duties.

In your case, you have been required to travel to site Y a couple of days each week for the entire income year. It is not a short term or temporary arrangement and you work there on a regular basis. The regularity of the travel to site Y prevents it from satisfying the second principle set out in MT 2027 which requires that the alternative destination be one that is not a regular place of employment.

In summary, site Y is not considered to be an alternative workplace according to MT 2027 but is instead another regular workplace. Your travel from home to site Y and back is not in the course of producing your assessable income. This travel does not satisfy the requirements of business kilometres and therefore your car expenses are not deductible according to section 28-12 of the ITAA 1997.

Consequently, the travel between home and site Y is private or domestic in nature and the car expenses incurred during this travel are not deductible.

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