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Ruling

Subject: Travel Expenses for a Pilot

Question 1

Are the expenses incurred by a pilot for travel to and from his employment base interstate deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No

Question 2

Are the expenses incurred by a pilot for travel expenses while on standby deductible under section 8-1 of the ITAA 1997?

Answer

No

Relevant facts and circumstances

The taxpayer is a pilot.

The employment base is in interstate; which is where the taxpayer is required to start and finish.

Due to shift start times there are occasions where the taxpayer will travel to interstate day before.

Conversely there are instances where the shift finishes interstate after the last flight has departed.

On these occasions the taxpayer will stay the night at the employment base.

The taxpayer is required to be on standby for shifts up to several days. This involves staying in interstate during this time.

Travel expenses are incurred during these periods.

Relevant legislative provisions

Section 8-1 of the Income Tax Assessment Act 1997

Reasons for decision

Question 1

The travel expenses incurred for travel to and from the employment base interstate are not deductible under section 8-1 of the ITAA 1997.

Section 8-1 of the ITAA 1997 provides for general deductions as follows;

You can deduct from your assessable income any loss or outgoing to the extent that:

(a) it is incurred in gaining or producing your assessable income; or

(b) it is necessarily incurred in carrying on a ^*business for the purpose of gaining or producing your assessable income.

8-1(2)  

However, you cannot deduct a loss or outgoing under this section to the extent that:

(a) ..

(b) it is a loss or outgoing of a private or domestic nature; or …

The Commissioner has issued an occupational ruling in respect of airline industry employees, Taxation Ruling TR 95/19. The Commissioner's views on home to work type travel expenses are expressed from paragraphs 134 to 155 of TR 95/19. The ruling states that the cost of travel between home and the taxpayer's normal work place is generally considered private and not deductible per subsection 8-1 (2)(b) of the ITAA 1997.

In this case, the taxpayer makes arrangements to arrive interstate the day before his shift begins due to the time of commencement. Further it is also stated that at the conclusion of a shift the last flight to where the taxpayer resides, has already left.

This is considered at paragraph 160 of TR 95/19 where;

160. Accommodation expenses incurred in maintaining a residence in the city of the airline employee's base while also maintaining a family residence in another city, i.e., a domicile port, are not an allowable deduction. We consider that the airline employee's duties commence when he or she 'signs on' at their base, not when he or she departs from his or her domicile port.

From this extract, it is clear that the Commissioner considers that where a taxpayer incurs expenses travelling to and from their place of employment, even where the employment is interstate, these expenses are private or domestic in nature.

Case law also supports this in FC of T v. Toms 89 ATC 4373; 20 ATR 466 where it was held that the expenses relating to accommodation near the work place while maintaining a family residence in another location were not allowable as they were considered private in nature.

Therefore applying these established views to this case, it is considered that travel to and from the employment base interstate, is an outgoing of private or domestic nature. These expenses are not deductible.

Question 2

The expenses incurred by a pilot for travel expenses while on standby are not deductible under deductible under section 8-1of the ITAA 1997.

The issue of home to work travel undertaken by a taxpayer during 'on call' (or standby) work shifts is covered under paragraphs 154 and 155 of TR 95/19.

154. Ground engineers may be contacted after regular hours for shiftwork or to attend to machinery breakdowns. Although a taxpayer may be required to travel to work in response to a call while on standby, this would not ordinarily alter the private character of that travel. In FC of T v. Genys 87 ATC 4875; (1987) 19 ATR 356, a nursing sister was denied the cost of travelling to and from work. She worked relief shifts in intensive care and the shifts were arranged by telephone. It was held there was nothing about the travel that distinguished it from normal travel to and from work.

155. In some instances, duties commence upon receipt of a phone call. In FC of T v. Collings 76 ATC 4254; 6 ATR 476, the taxpayer was engaged in the conversion of a computer facility and often used a personal computer at home that was connected by telephone to her employer's computer. If the problem could not be fixed through the telephone connection, the taxpayer was required to travel to the site. It was held that travel from home to the site was an allowable deduction as the performance of duties had commenced and the travel was effectively between two work sites (see Taxation Rulings IT 112 and IT 113).

The Commissioner considers that although a taxpayer may be required to travel to work in response to a call while on standby, would not ordinarily alter the private character of that travel. However paragraph 155 states that a deduction would be allowable in this situation where it is found that the performance of duties had commenced and the travel was effectively between two work sites.

Travel while on standby duty is considered in the same way by Taxation Ruling MT 2027, which, per paragraphs 11 and 13, is applicable to income tax. MT 2027 states at paragraphs 17 to 21 that an employee's travel to and from work in responding to a call while on standby duty would not ordinarily alter the character of that travel, that is, it remains private travel.

17. The fact that an employee may travel to and from work in response to a call while on stand-by duty would not ordinarily alter the character of that travel, i.e., it remains private travel.

18. However, the position will be different where it is concluded, on an objective analysis of the nature of the employment duties, that the employee commenced duties on receiving the call. In these circumstances the journey from home to the place of employment is undertaken not in order to commence employment duties but to complete duties of employment already underway before the journey commenced. As such, the travel would constitute business travel including the return trip.

19. An example of the application of this principle can be found in the decision in Owen v Pook (1970) AC 244 (discussed in paragraph 21(a) of Taxation Ruling IT 112). In that case a medical practitioner, under the terms of his appointment with a hospital, was required to be accessible by telephone to receive emergency calls and to give immediate instructions on treatment prior to travelling to the hospital, such that his responsibility for the patient commenced on receiving the call.

20. A further example was the subject of the decision in F.C. of T. v Collings 76 ATC 4254, 6 ATR 476 (discussed in paragraphs 11, 12 and 21(e) of Ruling IT 112). In that case an employee was engaged in supervising a major conversion in a computer facility under arrangements where she was required to be available at all hours to receive telephone calls and give advice to fellow workers at the office over the phone when problems arose in the operation of the computer. For this purpose, she was provided with a portable computer terminal which could be connected to the central computer through the telephone line. Where the problem could not be rectified by this means the employee would proceed to the office. In this case it was found that the employee was, in effect, on continuous duty.

21. These cases can be distinguished from the circumstances of an employee who is on stand-by duty but who, when called on by the employer, does not actually commence duties until after arriving at the place of employment (e.g., a pilot on stand-by duty who does not commence duty until after arriving at the airport).

It further stated that this view would be altered where, on an objective analysis of the nature of the employment duties, it can be shown that the employee commenced duties on receiving the call. This principle can be found in the decisions from Owen v Pook (1970) AC 244 and FC of T v Collings 76 ATC 4254.

The Commissioner has stated that the factors which established deductibility of home to work travel in the Owen v Pook and Collings cases can be distinguished from the circumstances of an employee who is on standby duty but who, when called on by the employer, does not actually commence duties until after arriving at the place of employment (e.g., a pilot on stand-by duty who does not commence duty until after arriving at the airport).

It is considered that the factors which supported a claim for travel costs between home and work in the Owen v Pook and Collings cases are not to be found in the circumstances of the taxpayer in this case. This is because the taxpayer is a pilot and would not commence duty until after arriving at the airport.

In considering the taxpayers circumstances in alignment with the relevant ATO views and external judgements, it is considered that the taxpayer is not entitled to a deduction for the expenses incurred for travelling between his home and his place of work in responding to standby shifts.

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