Edited version of your written advice

Authorisation Number: 1051446462434

Date of advice: 13 November 2018

Ruling

Subject: Travel and accommodation expenses

Question

Are you entitled a deduction for your travel expenses between Town X and Town Y?

Answer

Yes

Question

Are you entitled to a deduction for accommodation expenses incurred in Town Y?

Answer

Yes

This ruling applies for the following period:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

10 January 20XX

Relevant facts and circumstances

You reside at your permanent home in Town X.

You are employed by an organization in Town X. The main office of this organisation is based in Town Y.

You were required to restructure the organization. You travelled from Town X to Town Y during the period of restructuring to manage the employees onsite. All other activities in relation to your role were undertaken from the Town X office.

You spent a maximum of only a few consecutive days during your trips to Town Y, with a lower average of consecutive days on each trip.

You rented an apartment for your overnight stays in Town Y.

You paid an amount in rent for the relevant period.

You are entitled to a travel allowance from your employer but did not claim the cost of accommodation you incurred in Town Y from your employer.

You travelled alone and you were not accompanied or visited by any family member in the apartment in Town Y.

You only brought necessary personal effects in the apartment during the period of stay.

You did not transfer any family belongings to the apartment.

You did not spend additional nights outside the short trips required.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Income Tax Assessment Act 1997 Subdivision 900-B.

Reasons for decision

Summary

You are entitled to a deduction for your travel expenses between Town X and Town Y as you are travelling on work.

A deduction for rent paid on the apartment in Town Y will be allowable when the expense is not disproportionate to what you would have otherwise spent on suitable commercial accommodation and you did not rent the property from a related party.

You must have the necessary written evidence to substantiate your deduction claims. You will need to keep receipts/records in relation to your travel and accommodation expenses.

Detailed reasoning

Travel expenses

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all outgoings to the extent to which they are incurred in gaining or producing assessable income, or are necessarily incurred in carrying on a business for that purpose. However, a deduction is not allowable for outgoings that are of a capital, private or domestic nature.

In considering the deductibility of travel expenses a distinction is made between travel to work and travel on work. Where the duties of the job require a taxpayer to travel in the course of undertaking their work duties, the taxpayer's expenses can be deducted (Taylor v Provan 1975 AC 194).

A deduction is generally not allowable for the cost of travel by an employee between home and their normal workplace as it is considered to be a private expense. The cost of this travel is incurred to put you in a position to perform your duties of employment, rather than in the performance of those duties.

In your case, you are required to travel between Town X and Town Y in the course of your employment. Travel is fundamental to this position. Therefore you are considered to be travelling on work and your travel expenses including flights and taxis are deductable under section 8-1of the ITAA 1997.

Accommodation expenses

As with the general rules regarding travel between home and work, accommodation and living expenses are normally private or domestic in character. These costs are preliminary to the work, and are not incurred in the course of performing those activities. Likewise, where accommodation, expenses are incurred by an employee in relocating to a place of work or in living away from home to work, they are preliminary to the work and not deductible.

Accommodation expenses are only deductible 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.

Draft Taxation Ruling TR 2017/D6 Income tax and fringe benefits tax: when are deductions allowed for employees’ travel expenses? provides some guidance on the deductibility of expenses on an additional property purchased or rented as accommodation for work related travel. Paragraphs 56 and 57 states:

56. Additional property expenses are expenses an employee incurs to finance, hold and maintain residential property they have purchased or leased where the employee travels away from home for work and stays at the property.

57. Additional property expenses that can be claimed include: lease payments, rent, interest on borrowings used to acquire the property, rates, land tax, property insurance and general maintenance of the building and grounds.

In your case, the nature of your work and the scope of your duties required you to work in more than one location. Overnight stays in Town Y are required and reasonable from a practical point of view considering that your permanent home is in Town X. It is considered that your travels are attributed to your work activities rather than your choice on where to live.

Though the travels were frequent, it is considered that you are not relocating or living away from home. You travelled alone while your family remains in Town X, your family members did not visit or accompany you in the apartment, and you did not spend additional nights outside the short trips required by the office. You also brought only the necessary items for your travels and you did not transfer any family belongings to the apartment.

You can claim the cost of rented accommodation under section 8-1 of the ITAA 1997, so long as the expense incurred in relation to rental accommodation is not disproportionate to what you would have otherwise spent on suitable commercial accommodation.

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