Edited version of your written advice

Authorisation Number: 1051251307459

Date of advice: 18 July 2017

Ruling

Subject: Living away from home allowance

Question

Are you entitled to a deduction for your rent while living and working away from home?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2017

The scheme commenced on

1 July 2016

Relevant facts and circumstances

You commenced a training program in a specialist field. As part of your training you were contracted to work for a 6 month period in a rural area distant from your normal place of residence.

Your permanent place of residence is in a suburban area, which you maintained while you were working away, and returned for any holidays.

During your 6 months placement in the rural area you were offered share accommodation by your employer. The premises were not suitable for your working hours, so you leased temporary accommodation at your own expense.

You were paid a small housing allowance by your employer.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Detailed reasoning

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, or a provision of the ITAA 1997 prevents it.

Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example, unless a person arrives at work it is not possible to derive income. This does not mean that the expenditure on travel, accommodation or meals is incurred in the course of gaining or producing assessable income (Case V111 88 ATC 712).

Expenditure on the daily necessities of life (for example, accommodation, food and drink) is generally not deductible as it is not incurred in gaining or producing assessable income and is also considered to be private or domestic in nature. However, these expenses may be considered to be work related where they are incurred while an employee is travelling on work.

Miscellaneous Taxation Ruling MT 2030 discusses the difference between travelling on work and living away from home for work. It states that travelling on work occurs where the employee is travelling in the course of carrying out their duties of employment (such as an interstate truck driver or a travelling salesperson) whereas a person is living away from home for work where they are living away from their usual place of residence so as to be able to carry out employment duties for a time at the new (but temporary) workplace.

Where an employee is living away from home for work, their accommodation and meal expenses retain their character as private living expenses.

In Federal Commissioner of Taxation v. Toms 20 ATR 466; 89 ATC 4373, (Toms Case) 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. The Federal Court disallowed the forest workers deduction for the cost of maintaining a caravan and other living expenses. The taxpayer’s family home in Grafton was some 108 kilometres from the base camp so he lived in the caravan during the week and returned to the family home on weekends. The caravan was rendered necessary as much by the taxpayer’s choice of the place of his residence in Grafton as by his employment in the State forest, and its purpose was to enable him to retain his residence in Grafton although he was employed in the State forest. Had he lived at a town closer to the forest, there is no question the caravan would have been unnecessary.

Your situation is comparable to Toms case.

It is considered that during the six month period you worked in the rural area, your normal place of work was in the rural area and that you were living away from home for work. While it is acknowledged that your main residence was in a capital city, it is not considered that your travel from there to the rural area was work related. Rather it was private travel carried out to enable you to commence your employment duties. The distance of the travel does not alter the private nature of the travel.

As the rural area was your normal place of work during the six month period you worked there, your accommodation expenses were not associated with any work related travel. Similarly, any incidental expenses incurred in relation to your accommodation in the rural area are not incurred during the actual performance of your work, that is, during the production of assessable income.

The accommodation and incidental expenses incurred while living and working in the rural area are not incurred in gaining or producing your assessable income. Rather they are a private expense and no deduction is allowable under section 8-1 of the ITAA 1997.

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