Edited version of your written advice

Authorisation Number: 1051269242003

Date of advice: 15 August 2017

Ruling

Subject: Travel Expenses

Question 1

Can you claim accommodation, meal and travel expenses while working in a foreign country against your foreign sourced income?

Answer

No.

Question 2

Can you rely on Taxation Determination TD 2016/13 Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2016-17 income year?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 2017

The scheme commences on:

1July 2016

Relevant facts and circumstances

You are an Australian tax resident.

You maintain an abode in Australia.

You were employed by your employer from late 2016.

Until mid-2017 this employment was in in Country X.

You would work six weeks on, then 2 weeks off.

You would return to Australia in the two off weeks.

Your employer booked your flights to Australia.

You were paid an 'Accommodation Allowance’ that was itemised on your payslip.

As it was foreign employment you did not receive a PAYG payment summary and tax was withheld at the source.

While in Country X you stayed in a furnished apartment with a washing machine.

You had to supply your own linen.

The lease was for one year, but you could cancel the lease with one months’ notice.

The apartment was ten minutes’ walk from your usual place of work.

Your company policy allowed friends and family to visit, though no-one visited you in your time in Country X.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Travel expenses

An employee can deduct a travel expense under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 97) to the extent that:

● they incur the expense in gaining or producing their assessable income, and

● the expense is not of a capital, private or domestic nature.

An employee’s purpose or reason for incurring an expense or the fact they receive an allowance to cover those expenses are not of themselves enough to establish deductibility. The nature of the expense and the connection to the income producing activities determine whether it is deductible.

An employee’s ordinary cost of traveling between home and work, maintaining a home and consuming food and drink as they go about their day are private or domestic in nature and are not deductible. Employee costs for relocating and living away from home are not deductible. These costs and considered preliminary to work and are not incurred performing work duties.

Paragraph 54 of Draft Taxation Ruling TR 2017/D6 Income tax and fringe benefits tax: when are deductions allowed for employees' travel expenses? sets out that accommodation, meal and incidental expense are deductible by an employee where:

a) the employee's work activities require them to undertake the travel

b) the work requires the employee to sleep away from home overnight

c) the employee has a permanent home elsewhere, and

d) the employee does not incur the expenses in the course of relocating or living away from home

Your work activities required you to travel to Country X and you had to sleep away from your home overnight. You had a permanent home in Australia which you returned to. The fourth test considers whether you incurred the expenses in relocating or living away from home.

Living away from home

Whether or not you are living away from home depends on the facts of your circumstances. Paragraph 72 of TR 2017/D6 sets out the four factors that are considered if you are living away from home, namely:

a) the time spent working away from home

b) whether the employee has a usual place of residence at a previous location

c) the nature of the accommodation

d) whether the employee is, or can be, accompanied by family or visited by family and friends.

You would spend 42 days away from home at any one time and return to your usual place of residence in Australia for approximately two weeks at the end of every work period. While in Country X you had a furnished apartment with a washing machine that was located around 10 minutes’ walk from your usual place of work. You supplied your own linens. No friends or family visited you during your periods away, but there was not company policy that stated that they would not be allowed to visit or stay with you.

Paragraph 80 of TR 2017/D6 sets out that where an employee works from home for a considerable period of time and they stay in settled accommodation such as an apartment, it points to living away from home rather than travelling for work. This combined with the fact that the employer did not restrict access of family and friends from visiting show that this was living away from home rather than traveling for work.

Employee costs for living away from home are preliminary to work and are considered private or domestic in nature and are not incurred in performing work activities. Your living away from home expenses are not deductible.

Reasonable travel expenses

The payment of an allowance does not of itself allow a deduction to be claimed. Before a deduction can be claimed:

● the expenses claimed cannot exceed the amount actually incurred, and

● the expenses must be incurred for work-related purposes and be deductible under the income tax law.

As the travel, accommodation and meal expenses were determined to be private and domestic in nature and not deductible, a deduction cannot be claimed under Taxation Determination TD 2016/13 Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2016-17 income year on the basis that a travel allowance was paid.

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