Edited version of your written advice

Authorisation Number: 1051209908791

Date of advice: 3 April 2017

Ruling

Subject: travel and accommodation costs

Question

Are you entitled to a deduction for the accommodation, travel and removal expenses incurred as a result of having your principle place of residence in one city and working in another?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2016

The scheme commenced on

1 July 2015

Relevant facts

You have a main residence on which you have a mortgage.

You may be directed by your employer to work at various locations around Australia.

You travelled interstate to work for six months, and maintained your main residence, including mortgage payments and other related costs while you were relocated.

You worked the remainder of the financial year in the city where your main residence is located.

You personally paid rent while in the temporary accommodation interstate, and also paid your relocation costs.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Summary

The accommodation, travel, and relocation expenses you incur while working interstate are of a private nature and are incurred as a consequence of having your home in one place and working in another. Therefore, they are not incurred in gaining or producing your assessable income and are not deductible.

Detailed reasoning

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 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 (Lunney and Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166).

Generally accommodation and travel expenses incurred by a person, who lives away from home in order to carry out employment duties at the place of employment, will not be deductible. Expenses of this nature are private, or incurred before or after the activity of earning assessable income. 

Taxation Ruling IT 2614 examines the deductibility of relocation expenses. The ruling states that expenses incurred in relocating to take up an appointment with a new or existing employer are not allowable deductions as they are private or domestic in nature. This is so, regardless of whether an allowance has been paid, or if the relocation was involuntary. Taxation Ruling IT 2481 also discusses this expense. At paragraph 9 the ruling states the expenditure is not incurred in gaining or producing income and is not deductible as the taxpayer is not travelling on work, but to work.

The issue of expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location has been considered by the courts on a number of occasions.

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 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.

This is supported by the decision in Federal Commissioner of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466 (Toms 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.

Your circumstances are considered to be comparable to those in Charlton's case and Toms' case. From the information provided it is clear your place of employment was in another state and you have made a choice to move away from your family home to work interstate. Any accommodation, travel, and relocation expenses you may incur to stay interstate will be incurred to put yourself in a position to perform your duties and not in the actual performance of those duties.

Your accommodation, travel, and relocation expenses are considered to be of a private or domestic nature and are not deductible under section 8-1 of the ITAA 1997.

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