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Ruling

Subject: Work related expenses

Question 1:

Are you an itinerant worker?

Answer:

No

Question 2:

Are you entitled to a deduction for fitness expenses?

Answer:

No

Question 3:

Are you entitled to a deduction for the costs incurred to undertake activities similar to those carried out in your employment?

Answer:

No

This ruling applies for the following periods:

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

The scheme commences on:

1 July 2009

Relevant facts and circumstances

The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are: 

· the application for private ruling, and

· the documents provided in response to the requests for further information.

You hold short term employment contracts.

There are often long periods of time when you are not required to work, even when under contract.

You travel to the boat that you will be working on, where you may stay for several weeks, and then return home.

The employers cover the major costs of transportation; however you do incur some minor travel expenses.

As there are often periods where there is no work, you may undertake activities to maintain your skills and incur expenses in doing this outside your employment.

You have been employed continuously for the past few years meaning you have not been required to maintain your skills outside of your work requirements.

Your position requires you to undertake very physical work.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1.

Reasons for decision

Question 1:

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction 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.

Itinerant worker

Travel between home and work is not ordinarily deductible, as it is not incidental and relevant to earning a taxpayer's income and is private or domestic in nature.

However, a taxpayer who is carrying out itinerant work is entitled to a deduction for travel between their home and work.

Taxation Ruling TR 95/34 highlights factors that indicate a taxpayer's work is itinerant. The main factors are:

· travel is a fundamental part of the employee's work

· the existence of a web of work places in the employee's regular work (the employee has no fixed place of work), and

· the employee continually travels from one work site to another and must work at more than one work site before returning home.

TR 95/34 states at paragraph 17:

In FC of T v. Genys (1987) 17 FCR 495; 87 ATC 4875; (1987) 19 ATR 356 (Genys case), the Federal Court held that the taxpayer's employment was not itinerant. The taxpayer was a registered nurse who used an employment agency to seek relief work with various hospitals. She was not continuously employed by any one hospital. When a hospital was in need of additional staff they contacted the agency which would then contact the taxpayer. It was integral to the decision in this case that the taxpayer did not travel after the commencement of her duties. She merely travelled to work and home again. Northrop J (FCR at 498; ATC at 4879; ATR at 359) described itinerant as 'shifting places of work':

Continual travel refers to the frequency with which an employee moves from one work site to another. It envisages that the employee regularly works at more than one work site before returning to his or her usual place of residence. If an employee stays at a particular work site for a short period (for example, several days or a few weeks) they may still be regarded as engaged in itinerant employment provided their usual pattern of work involves continual travel to more than one work site before returning to their usual place of residence.

In your case, you travel to the boat that you will be working on, where you may stay for several weeks, and then return home. The boats themselves are considered to be your place of work; while the boats may travel from location to location, you are not required to travel to various work sites before returning home.

Accordingly, you are not considered to be an itinerant worker within the definition provided within TR 93/34.

Question 2:

You are entitled to a deduction for expenses that directly relate to your work as an employee. The Commissioner generally takes the view that expenses incurred in keeping fit are inherently private in nature as it ultimately involves the person's own physical wellbeing.

This position does not change even if the person is employed to undertake physical activity as part of their duties. For example, a police officer or a member of the military would not generally be able to deduct the costs of maintaining their fitness levels as a tax deduction.

According to Taxation Ruling TR 95/17, Defence Force members are required to maintain a high standard of general physical fitness, however expenses incurred in maintaining this standard of fitness are considered to be private in nature and not allowable as a deduction.

TR 95/13 states that a deduction is not allowable for fitness expenses for police officers as it is considered to be private.

These two taxation rulings provide for an exception where the person's physical fitness has to be at an abnormally high or elite level for that person to undertake their duties. For example, a police academy physical training instructor or soldiers attached to the elite Special Air Services Regiment may be able to claim expenses associated with maintaining their fitness levels.

Clearly both these taxation rulings follow the principle that unless your normal duties require a highly advanced or elite fitness level, deductibility of expenses will be denied.

In your case, your duties require you to maintain a certain level of fitness. While we acknowledge this, we do not consider that you are required to maintain a level of fitness well above the general standard. Therefore, you are not entitled to a deduction under section 8-1 of the ITAA 1997 for the expenses you incur to maintain your fitness.

Question 3:

For a deduction to be allowable under section 8-1 of the ITAA 1997, a sufficient nexus must exist between the expenditure and the gaining or producing of assessable income.

The expense must have the essential character of an outgoing incurred in the course of gaining assessable income. It is also necessary to determine the connection between the particular outgoing and the operation or activities by which the taxpayer most directly gains or produces his or her assessable income.

In your case, there are often periods where you do not work even when under contract. If this occurs, to maintain your skills you may undertake activities outside of your work.

The activities you undertake do not necessarily duplicate the conditions of your work environment. Whilst the activities may assist to maintain your skills, it is not considered that this assists you in completing your duties as an employee.

A deduction is not allowable for the costs incurred as there is an insufficient nexus between the expense and your duties.

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