Edited version of your written advice

Authorisation Number: 1051216635790

Ruling

Subject: Work related expenses travel costs

Question 1

Is the travel from place of work to another township an allowable deduction?

Answer

No

Question 2 Are you entitled to a deduction for the costs you incur to travel directly between place of work B and place of work A?

Answer

Yes

This ruling applies for the following period:

Year ended 30 June 2016

The scheme commences on:

1 July 2015

Relevant facts and circumstances

You worked for an employer as a Manager on Higher Duties from Monday to Friday each week.

Your substantive position was as an employee within an organisation based in a town.

You managed two teams, at different workplaces.

You were primarily based in a town.

Your home address for the period of the application was your previous residential address.

Your two workplaces were place of work A and place of work B

Your typical pattern of travel for a working week was as follows:

● To leave your home in a town on a Sunday afternoon. Attended place of work A to check emails and collect files. You would then travel to another town to your place of accommodation where you would be based for the remainder of the week.

● Each Monday you would commence work at place of work B.

● You travelled from place of work B to place of work C and return on Wednesday's utilising transport supplied by your employer

● On Friday you would leave place of work B in the afternoon and travel back to place of work A, where you would log onto the office computer, complete any work that was required including emails and other documentation, returning files to storage before going home. Generally you would be in the office for a minimum of 1.5hours but typically more than this. Prior to departure as a manager you would ensure all outcomes had been completed and addressed prior to your departure from the place of work A. This could take several hours on occasions.

● You then returned to your home.

You had two vehicles for the financial year.

You do not travel back to your home every weekend due to personal reasons.

When you are away, you utilised your partner's vehicle for personal travel.

You have maintained a log book detailing your travel between place of work B and place of work A as a return trip.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Income Tax Assessment Act 1997 Section 12-5.

Income Tax Assessment Act 1997 Section 25-100.

Reasons for decision

Question 1

Summary

A deduction is not allowable if the individual does not travel directly from the first workplace to the second workplace, or performs an intervening private or domestic activity in the interval between completing assessable income-earning activities at the first workplace and commencing assessable income-earning activities at the second workplace.

Detailed reasoning

Expenses incurred in travelling are deductible expenses under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) where 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 or a provision of the taxation legislation excludes it.

The essential purpose of home to work travel is not to enable a person to derive assessable income. Such expenses are incurred as a consequence of living in one place and working in another (Lunney v. Federal Commissioner of Taxation (1958) 100 CLR 478; Federal Commissioner of Taxation v Cooper (1991) 29 FCR 177; 91 ATC 4396; 21 ATR 1616). That is, the cost of travel between home and work is generally incurred to put the employee in a position to perform duties of employment, rather than in the performance of those duties. The completion of minor tasks along the way, the mode of transport, availability of transport, lack of suitable public transport, distance travelled, frequency of travel and necessity of travel are all factors which do not alter this conclusion.

In your case your travel is seen to put you in a position to perform your duties, you do not travel directly between two workplaces on the same day when travelling from one town to another. The expenses that you have incurred are considered to be private expenses or domestic in nature.

Accordingly, you are not entitled to a deduction for the expenses that you have incurred in travelling between your home and your place of employment, under section 8-1 of the ITAA 1997.

Question 2

Summary

A deduction is allowable when an individual travels directly between two workplaces for the purpose of earning assessable income at each workplace.

Detailed reasoning

The cost of travel between two or more different places of work or business would normally be deductible provided that the taxpayer does not reside at one of those places and the travel is undertaken for the purpose of engaging in income-producing activities.

Section 25-100 of the ITAA 1997, was introduced to overcome the effect of the decision in Commissioner of Taxation v. Payne [2001] HCA 3, where the High Court held that such expenses were not deductible under the general deduction provision as they were not incurred in gaining or producing assessable income but rather incurred in the interval between the two activities. Section 25-100 of the ITAA 1997 provides a specific deduction for transport expenses incurred on travel between two workplaces where certain conditions are met. These conditions include:

● the individual must have incurred transport expenses in travelling between two workplaces

● the purpose of the travel between workplaces is to earn assessable income at the second workplace

● the individual does not reside at either place, and

● expenses incurred must not be capital, or of a capital nature .

The Explanatory Memorandum to the Tax Laws Amendment (2004 Measures No. 1) Act 2004, which inserted section 25-100 into the ITAA 1997, provides a number of examples of what would be an allowable deduction for transport expenses between two workplaces including the following:

Example 2.2

Marisa carries on two separate businesses in two locations. At one place, she carries on a business of a café. At another place, she carries on a business of a craft shop. Marisa does not reside at either place.

Marisa drives her car directly between the two businesses every day. The car expenses Marisa incurs in travelling directly between the two businesses (her first and second workplaces) are deductible under this provision.

In the above example, the transport expenses would not be deductible if Marissa first returned home to change into alternative attire, or if she went shopping during her travel between her two businesses, or she stopped for a meal on the way to the second business.

In your case as with the above example, you are required to work at two different workplaces on the same day. When you do so, you travel directly from one work place to another. You do not reside at any of the workplaces and the expenses that you have incurred are not considered to be capital in nature.

Accordingly, you are entitled to a deduction for the travel expenses that you have incurred travelling directly from one workplace to another workplace, under section 25-100 of the ITAA 1997.

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