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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your written advice

Authorisation Number: 1051262269097

Date of advice: 02 August 2017

Ruling

Subject: Work-related travel deductions

Question

Are you entitled to claim a deduction for your travel expenses?

Answer

No.

This ruling applies for the following periods:

The scheme commences on:

1 July 2015.

Relevant facts and circumstances

You regularly commute from your place of residence to another state and then to a remote site.

Your employer pays for the flight from the airport of the other state to the worksite.

You pay for the cost of the flight from your place of residence to the other state.

You pay for accommodation to stay overnight in the other state before the flight to the remote site early the next morning.

You taxi to the airport from your accommodation at your own expense.

You were employed by two different employers.

Your travel arrangements did not change with the change of employer.

In both situations your employment was covered by documents which stated that your travel to and from the worksite was done in the off duty period.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

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.

Travel Expenses

In considering the deductibility of travel expenses, a distinction is made between travel to work and travel on work. It is only if the duties of the job require a taxpayer to travel that the taxpayer's expenses can be deducted.

A deduction is generally not allowable for the cost of travel by an employee between their home and their normal workplace as it is considered private in nature. The cost of such travel is generally incurred to put the employee in a position to perform their duties of employment, rather than in the performance of those duties (paragraph 77 of Taxation Ruling TR 95/34).

Lunney v. Commissioner of Taxation [1958] ALR 225; 1958 0311H HCA; 100 CLR 478; (1958) 11 ATD 404; (1958) 32 ALJR 139 introduced what is now regarded as the essential character test. This test requires that for an expense to be deductible, it must have the essential character of a business or income producing expense. The taxpayer in this case sought to deduct the cost of travelling from his home to his work. The expenses were disallowed as being private and domestic, establishing the broad principle that costs incurred because of living in one place while working in another cannot be regarded as deductible. The reasons given by the High Court were twofold.

The fact that certain expenditure, such as travelling to work, must be incurred in order to be able to derive assessable income, does not necessarily mean that the expenditure is incidental and relevant to the derivation of assessable income. It is a prerequisite to the earning of assessable income rather than being incurred in the course of gaining that income.

The essential character of the travel to and from work is that of a private and domestic nature, related to personal and living expenses as part of the taxpayer's choice of where to live, in choosing to live away from and what distance from work.

The John Holland Case

In John Holland Group Pty Ltd & Anor v Commissioner of Taxation (2015) 232 FCR 59 it was determined that a distant or remote location for the performance of employment duties may be a relevant factor in determining whether the travel was part of the employment. The location of the place at which work needs to be performed may occasion a need for travel to be part of the employment.

In the John Holland case the employees commenced their employment duties when “rostered on” at Perth airport. On that basis, the court was able to conclude that the costs of the flights from Perth airport to Geraldton, if paid by the employees, would have been incurred by them in gaining or producing their assessable income for the purposes of section 8-1 of the ITAA 1997.

Application to your circumstances

Your situation differs to the factual circumstances in John Holland. You are arguing you were rostered on from the moment you left your home residence. The employment agreements you entered into contradicted this claim. They both stated that travel to and from the work site was conducted in the off duty period.

The employer did pay you for the whole 12 hours on the last day of your working cycle which includes the hours worked on the site and hours travelled between the airport and your place of residence. However the fact you were paid during your off duty travel period does not mean that you were being rewarded for your time travelling. Rather these payments formed part of an overall package of remuneration designed to attract and reward employees who were willing to work in distant and/or remote locations.

Overall, the occasion of the outgoings of the flights, taxi fares and accommodation is to be found in off duty activities and not income producing activities. You have incurred expenses for travel between your home and your work. This travel is incurred in order to put you in a position to perform your duties of your employment; it is not incurred in the performance of the duties of your employment.

The expenses you incur in travelling between your home and work are private in nature. Therefore, you are not entitled to a deduction for these expenses under section 8-1 of the ITAA 1997.

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