Edited version of private advice

Authorisation Number: 1012617237706

Ruling

Subject: accommodation and meals

Question

Are you entitled to a deduction for the cost of accommodation and meals?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

1 July 2012

Relevant facts

You are a professional.

You live in City A and work at City B and City C.

Your Professional Indemnity Insurance company have imposed certain conditions to your policy.

To be able to comply with the conditions imposed by the insurance policy, you maintain an apartment at City B.

Your job entails working very long hours.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in the course of gaining or producing assessable income, but are not allowable to the extent that they are of a capital, private or domestic nature.

Generally, accommodation expenses incurred by an employee who lives away from home to carry out the duties of their employment will not be deductible. Expenses of this nature have been found to be private or incurred before or after the activity of earning assessable income.

This is supported by the decision in Federal Commissioner of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466 (Tom's case), where the Federal Court held that expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location were not an allowable deduction as they were considered to be private expenses.

In the case Federal Commissioner of Taxation v. Charlton 84 ATC 4415; (1984) 15 ATR 711 (Charlton's Case), the taxpayer was a pathologist employed to carry out autopsies for the local coroner in Bendigo. He rented a flat in Bendigo while maintaining a permanent family home in Melbourne, located approximately 150kms away. There was evidence that there was difficulty in finding motel accommodation in Bendigo and the taxpayer was reluctant to make the round trip back to Melbourne without rest.  The taxpayer claimed that the rental expenses were incurred in the production of assessable income. 

Justice Crockett of the Supreme Court of Victoria allowed the Commissioner's appeal and ruled:   

The Commissioner contends (correctly in my view) that, if the taxpayer should choose to reside so far from the place where it is necessary for him to be in order to gain his income that he, not only needs to incur expense in travelling to that place but, also to incur expense in the provision to him of some accommodation transitory or discontinuous in its use and secondary to or temporarily supplemental of his actual home, then that expense, too, is for the same reason non-deductible.

The taxpayer's election to live in Melbourne and not in Bendigo meant that the rental expended on the flat in order to enable him to secure accommodation in which to recuperate from the rigours of travel and the nature of his work was an expenditure dictated not by his work but by private considerations.

We accept that it is a requirement of your Professional Indemnity Insurance that you stay close to your work. However, your accommodation and meal expenses arise out of your choice to live in City A while working in Cities B and C, rather than living away from home for work. As in Tom's case and Charlton's Case, the cost of accommodation and meals are private and domestic nature, which are incurred to enable you to work in Cities B and C. They are not incurred during the actual performance of your work, that is, during the production of assessable income, and as such are not deductible.

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