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Edited version of your written advice
Authorisation Number: 1051319790567
Date of advice: 13 December 2017
Ruling
Subject: Work related deductions
Question and answer
Are you entitled to a work related deduction for the cost of renting a property closer to your work?
No.
This ruling applies for the following periods:
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
The scheme commenced on:
1 July 2013
Relevant facts and circumstances
You are a sole trader and sub-contractor.
You lived and owned a property in town A.
You could not get work in town A.
You rented a property in town B where you secured work.
You worked in town B during the week and returned to town A at the weekends.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1.
Reasons for decision
According to section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), you can deduct a loss or outgoing if it is incurred in producing your assessable income except where the outgoing is of a capital, private or domestic nature.
The courts have concluded that accommodation and meal expenses incurred while working away from home are essentially living expenses of a private or domestic nature and therefore are not deductible.
The expenses you incur enable you to stay in proximity to your work place. They are a prerequisite to the earning of assessable income and are not expenses incurred in the course of gaining or producing that income.
In the case Federal Commissioner of Taxation v. Charlton 84 ATC 4415; (1984) 15 ATR 711 (Charltons Case), the taxpayer was a pathologist employed to carry out autopsies for the local coroner in Bendigo. He rented a flat in Bendigo while maintaining a permanent family home in Melbourne, located approximately 150kms away. There was evidence that there was difficulty in finding motel accommodation in Bendigo and the taxpayer was reluctant to make the round trip back to Melbourne without rest. The taxpayer claimed that the rental expenses were incurred in the production of assessable income.
Justice Crockett of the Supreme Court of Victoria allowed the Commissioner's appeal and ruled:
The Commissioner contends (correctly in my view) that, if the taxpayer should choose to reside so far from the place where it is necessary for him to be in order to gain his income that he, not only needs to incur expense in travelling to that place but, also to incur expense in the provision to him of some accommodation transitory or discontinuous in its use and secondary to or temporarily supplemental of his actual home, then that expense, too, is for the same reason non-deductible.
The taxpayer's election to live in Melbourne and not in Bendigo meant that the rental expended on the flat in order to enable him to secure accommodation in which to recuperate from the rigours of travel and the nature of his work was an expenditure dictated not by his work but by private considerations.
This is supported by the decisions in Federal Commissioner of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466 (Toms Case), where 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.
Your case is comparable to that of the taxpayers in Charltons case and Toms case. You live away from your workplace and incur expenses in renting private accommodation.
Living in town B puts you closer to your work.
The rental expenses are considered to be private in nature and are not deductible under section 8-1 of the ITAA 1997.
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