Edited version of private advice

Authorisation Number: 1051523958773

Date of advice: 1 August 2019

Ruling

Subject: Travelling for work expense

Question 1

Are you entitled to a deduction for flights, taxi and public transport expenses between your home and your place of work in a city 350 km away?

Answer

No

Question 2

Are you entitled to a deduction for accommodation and meal expenses while working away from home?

Answer

No

This ruling applies for the following periods

Year ended 30 June 2018

Year ended 30 June 2019

Year ended 30 June 2020

Year ended 30 June 2021

The scheme commenced on

1 July 2017

Relevant facts

You are a sole trader receiving personal services income.

Your permanent place of residence is in a country city, and your spouse resides there.

You receive personal services income from a company, relating to a client of the company.

The current project requires you to work from the company offices interstate.

You are required to be at that location to work as a member of a team.

You have been working on the current project for 12 months.

For 5 months you worked from an office location interstate, and then this location changed to another office in the same city, where you are currently working.

You also travel approximately 200km to a country location on average one day per week, staying there overnight occasionally.

You also travel to two other country destinations infrequently, for work on the same project. The current project was due to be completed in after 6 months, but is still ongoing, and expected to cease in 2019. Your engagement with your employer is on a week to week basis and can be terminated anytime.

For 5 months you stayed interstate 4 nights per week, travelling from your home to the interstate location on a Monday, returning to your family home on Friday.

Recently, you were only needed interstate 3 nights per week, you also worked from home some Fridays and weekends for your employer and a small amount of work for other clients.

When travelling for work you pay for your home to interstate flights, as well as transport costs to airport, apartment and work offices.

It is not practical for you to travel home over 200km to the family home each day, and you have not set up a permanent home interstate due to the short term nature of project, uncertainty, and your family remaining at the family home.

When working from interstate offices you personally pay to stay in apartments there. This is on a week to week basis. There is no long term or permanent accommodation arrangement.

No personal belongings are left at the work location; your laundry is done on your return home.

You personally pay the meal expenses you incur when away from home.

You are paid a daily rate which you negotiated to factor in costs for transport, accommodation and meals. If you weren't incurring these expenses you would be paid a lower daily rate.

Each week you submit copies of invoices for travel and accommodation to the company; these are passed on to their client for reimbursement.

Once this work ceases, you expect to work for the same company on an alternate project in another location, then Sydney.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Summary

You temporarily relocated to another location to work. The expenses you incurred for travel, accommodation and meal expenses while working away from home are of a private nature.

The expenses are a prerequisite to the earning of assessable income. They are incurred in order to enable you to earn income but are not incurred in the course of gaining or producing that income; therefore, they are not deductible.

Detailed reasoning

Section 8-1 of the Income Tax Assessment Act 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.

Accommodation

Accommodation expenses are ordinarily not deductible as they are private and domestic in nature.

An exception is where a taxpayer is travelling in the course of performing their work duties, for example, an interstate truck driver who travels away from home overnight. In these types of cases, the accommodation, meal and incidental expenses incurred while the taxpayer is travelling are incidental to the proper carrying out of their employment function and cease to be of a private and domestic nature.

However, it is important to distinguish taxpayers who travel in the course of carrying out their employment duties from taxpayers who are living away from home. In the latter case, the taxpayer moves and takes up temporary residence away from their usual place of residence so as to be able to carry out employment duties for a time at the new (but temporary) workplace.

For taxpayers who are living away from home, there is a change of job location and a temporary change of residence to a place at or near that location. For example, an employee who is transferred for three months to an office in another city and takes up temporary accommodation in that city whilst maintaining their own usual place of residence would be in this category. In this type of situation, the accommodation, meal and incidental expenses incurred while the person is living away from their usual home do not cease to be private and domestic in nature. That is, they are considered to retain their character as living expenses rather than becoming work related expenses.

Miscellaneous Taxation Ruling MT 2030 discusses the difference between travelling on work and living away from home for work. It states that taxpayers who are travelling on work normally do so for comparatively short periods.

In your case, you were working interstate for several months. It is considered that for this period you were living away from home for work rather than travelling on work. That is, it is not considered that travel was a part of your actual work duties. Rather, your work location had changed and you chose to take up temporary residence near your new work location. Therefore, your accommodation expenses are considered to retain their character as living expenses. As these expenses are private and domestic in nature, a deduction is not allowable.

Flights and Travel

Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example unless one arrives at work it is not possible to derive income. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income. Rather, the expenses are incurred to enable the taxpayer to commence income earning activities (Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166).

Generally accommodation and travel expenses incurred by a person, who lives away from home in order to carry out employment duties at the place of employment, will not be deductible. Expenses of this nature are private, or incurred before or after the activity of earning assessable income.

Taxation Ruling IT 2614 examines the deductibility of relocation expenses. The ruling states that expenses incurred in relocating to take up an appointment with a new or existing employer are not allowable deductions as they are private or domestic in nature. This is so, regardless of whether an allowance has been paid, or if the relocation was involuntary. Taxation Ruling IT 2481 also discusses this expense. At paragraph 9 the ruling states the expenditure is not incurred in gaining or producing income and is not deductible as the taxpayer is not travelling on work, but to work.

The issue of expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location has been considered by the courts on a number of occasions.

In the case Federal Commissioner of Taxation v. Charlton 84 ATC 4415; (1984) 15 ATR 711 (Charlton's 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 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 decision 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 circumstances are considered to be comparable to those in Charlton's case and Toms' case. From the information provided it is clear your place of employment was in Melbourne and other centres, and you have made a choice to temporarily move away from your family home to work interstate. Any accommodation and travel expenses you may incur to stay interstate will be incurred to put yourself in a position to perform your duties and not in the actual performance of those duties.

Your accommodation and travel expenses are considered to be of a private or domestic nature and are not deductible under section 8-1 of the ITAA 1997.

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