Edited version of your written advice

Authorisation Number: 1051296728801

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Date of advice: 19 October 2017

Ruling

Subject: Work related expenses: travel expenses.

Question 1

Am I entitled to deduct travel expenses incurred in travelling between co-existing work locations as a work related tax deduction?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 2017

The scheme commences on:

1 July 2016

Relevant facts and circumstances

You accepted a position, commencing on XX 2016. Your employment contract stipulates that you are based at the XX Offices. However, you were verbally advised (and this verbal instruction has subsequently been confirmed in writing) that you would also be expected to also work out of the YY office in another city. You are expected to be available in the XX office at least Z days per week, Z weeks in every month.

Any remaining time when you were not physically present in either the XX or YY offices of your employer were to be utilised by flexible working arrangements. This includes working from home if necessary.

Your employer has confirmed that you are expected to remain accessible to normal work whilst you travel (when connectivity is available) and that you are expected to deal with enquiries and the fulfilment of your normal work responsibilities while in transit.

You do not receive travel or accommodation allowances and all travel is at your own expense.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

An expense is deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) if and to the extent to which it is incurred in gaining or producing your assessable income or in carrying on a business for that purpose. However you cannot claim a deduction for an expense that is of a capital, private or domestic nature.

A deduction is only allowable if an expense:

● is actually incurred

● meets the deductibility tests

● satisfies the substantiation rules.

Work-related travel expenses you incur that are directly related to your work as an employee include:

● public transport, including air travel and taxi fares

● bridge and road tolls, parking fees and short-term car hire

● meal, accommodation and incidental expenses you incur while away overnight for work

● expenses for motorcycles and vehicles with a carrying capacity of one tonne or more, or nine or more passengers, such as utility trucks and panel vans

● actual expenses (such as any petrol, oil and repair costs) you incur to travel in a car that is owned or leased by someone else.

The draft taxation ruling TR 2017/D6 addresses this subject. The ruling states –

“Where travel expenses are incurred in performing the employee’s work activities and no part of them is of a private, domestic or capital nature, expenses are fully deductible.”

To determine whether travel is undertaken in performing an employee’s work activities, the draft ruling sets out the following factors to consider –

(a) whether the work activities require the employee to undertake the travel

(b) whether the employee is paid, directly or indirectly, to undertake the travel

(c) whether the employee is subject to the direction and control of their employer for the period of the travel, and

(d) whether the above factors have been contrived to give a private journey the appearance of work travel.

Both your employment contract and a subsequent letter from your employer outline the requirement and expectation that you work in co-locations in XX and YY. It is considered that this satisfies the first condition above that you are required to undertake this travel.

As a salaried employee the second condition is satisfied when it is evident from the terms of employment that travel is undertaken in performing your normal work activities. It is considered that this second condition above is satisfied by your engagement letter.

Finally your employer has confirmed in writing that you are still subject to your employer’s direction and control even while travelling and are expected to complete your normal work and be available for normal enquiries when connectivity exists to do so. It is considered that this satisfies the third condition above.

The draft ruling also defines co-existing work locations –

“Co-existing work locations travel involves travel which can be attributed to the employee having to work in more than one location. This is the case where:

● the travel is directly between work locations, or between home and an alternative work location, and

● it is reasonable to conclude that the travel is undertaken in performing the employee's work activities because of the requirement to work in more than one location.”

Your employer has confirmed that your travel is required as a normal part of your duties. As a result, your travel can be classified as being between co-existing work locations.

Accordingly, you are entitled to deduct your work related travel expenses which are incurred in travel between co-located offices as a tax deduction. Any such deduction is subject to the normal substantiation requirements as set out below.

Substantiation

The substantiation provisions of Division 900 of the ITAA 1997 require that certain written evidence be maintained in respect of work-related expenses. If the required written evidence is not available, generally the expenses cannot be claimed as deductions.

Section 900-115(2) of the ITAA 1997 states that you must get a document from the supplier of the goods or services the expense is for. The document must set out:

● the name or business name of the supplier

● the amount of the expense, expressed in the currency in which it was incurred

● the nature of the goods or services

● the day the expense was incurred

● the day it is made out.

A taxpayer must supply substantiation to the Commissioner when called upon to do so. If the required written evidence is not available, generally the expenses cannot be claimed as deductions.

Generally, you must keep your written evidence for five years from the date the notice of assessment is sent to you, or, if you:

● have claimed a deduction for decline in value (formerly known as depreciation) – five years from the date of your last claim for decline in value

● acquire or dispose of an asset – five years after it is certain that no capital gains tax event can happen so you know you don't need the records to work out a capital gain or loss

● are in dispute with us – the later of five years from the date you lodge your return or when the dispute is finalised.

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