1051537756449 | Legal database

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Edited version of private advice

Authorisation Number: 1051537756449

Date of advice: 28 June 2019

Ruling

Subject: Deductions - work related expenses

Question

Can you claim deductions for expenditures including: car parking, rent, taxi fares, travel to and from airport, flights and meals for working away from home when maintaining a home residence and working in another state?

Answer

This ruling applies for the following periods:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You commenced employment as a contractor in June 20XX.

Your place of work under this arrangement was in another state of Australia.

From June 20XX to August 20XX, you rented a property closer to your place of work.

You worked Monday to Friday away and returned home on weekends.

You paid for your own travel and accommodation expenses.

In August 20XX, your employment under this contractor arrangement ended.

You commenced new employment as a contractor in April 20XX.

Your place of work under this arrangement was in another state of Australia.

From April 20XX to October 20XX, you rented share accommodation close to your place of work.

You worked Monday to Friday away and returned home on weekends.

You paid for your own travel and accommodation expenses under this arrangement.

This continued until October 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 paragraph 8-1(2)(b)

Reasons for decision

Draft taxation ruling TR 2017/D6: sets out the general principles for determining whether an employee can deduct travel expenses under section 8-1 of the ITAA 1997. TR 2017/D6 is a consolidation of rulings that applied during the relevant years of this Private Binding Ruling.

Travel to start work is not required by the work activity but is preliminary to the work (paragraph 23 of TR 2017/D6).

It is only in limited circumstances that an employee's accommodation expenses are deductible, as generally, accommodation expenses are of a private or domestic nature. An employee's ordinary costs of maintaining a home are of a private or domestic nature and are not deductible. Such costs are preliminary to work and are not incurred in performing work activities, in the same manner as travel expenses to and from work are preliminary to work and are not incurred in performing work activities (paragraph 15 of TR 2017/D6). These expenses are incurred to enable an employee to commence their income earning activities and are therefore considered private in nature.

The costs of relocating for work or living away from home to work are preliminary to work and are not deductible (paragraphs 16, 49 and 52 of TR 2017/D6), regardless of whether commencing new employment or transferring permanently or temporarily within an existing employment. The costs of relocating or living away from home are not incurred in performing an employee's work activities. They are of a private or domestic nature and reflect an employee's choice about where to live (paragraph 53 of TR 2017/D6). This is the case even though a taxpayer may, as a matter of practicality, need to incur the expenditure to earn assessable income.

It is also the case that an employee is not entitled to deduct an expense simply because they receive an allowance or other payment for that expense. The nature of the expense and its connection to the income producing activities determine whether the expense is deductible (paragraph 14 of TR 2017/D6).

In the case Federal Commissioner of Taxation v. Charlton 84 ATC 4415; (1984) 15 ATR 711 (Charlton's Case), the taxpayer was employed in Bendigo. He rented a flat in Bendigo while maintaining a permanent family home in Melbourne. The taxpayer claimed that the rental expenses were incurred in the production of assessable income. Crockett J stated at 84 ATC 4419-4420:

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.

The taxpayer's circumstances are very similar to those in Charlton's Case. Accordingly, the travel, meals and accommodation costs paid for by the taxpayer are domestic and private in nature and are not deductible.

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