Edited version of private advice

Authorisation Number: 1051664465604

Date of advice: 21 May 2020

Ruling

Subject: Work related deductions

Question 1

Are you entitled to a deduction for your work related car expenses?

Answer

Yes.

Question 2

Are you entitled to a deduction for bridge and road tolls and parking fees when you are travelling for work purposes?

Answer

Yes.

Question 3

Are you entitled to a deduction for your accommodation and meal expenses when you choose to stay in accommodation near your workplace?

Answer

No.

Question 4

Are you entitled to a deduction for your accommodation and meal expenses when you are required to work temporarily away from home?

Answer

Yes.

Question 5

Are you entitled to a deduction for protective clothing, sunscreen and laundry expenses?

Answer

Yes.

Question 6

Are you entitled to a deduction for your self-education, stationery and licence expenses?

Answer

Yes.

Question 7

Are you entitled to a deduction for running expenses in relation to your home office?

Answer

Yes.

Question 8

Are you entitled to a deduction for occupancy expenses in relation to your home office?

Answer

No.

Question 9

Are you entitled to a deduction for phone and internet charges to the extent that you use your phone and internet for work purposes?

Answer

Yes.

Question 10

Are you entitled to a deduction for the decline in value of your computer, phone, iPad, two way radio and work equipment (stop boards, point clips and limit boards)?

Answer

Yes.

Question 11

Are you entitled to a deduction for child minding fees?

Answer

No.

Question 12

Are you entitled to a deduction for the cost of maintaining your dogs?

Answer

No.

This ruling applies for the following periods

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on

1 July 20XX

Relevant facts and circumstances

You are employed on a casual basis.

You use your own car to transport dangerous goods and other safety equipment required for work.

You pay bridge and road tolls and parking fees when you are travelling for work purposes.

You are paid a travel allowance each day (except when you are receiving a living away from home allowance) you work. The amount of the allowance is determined by the distance between your home and worksite.

You are paid an allowance (called a living away from home allowance in your Agreements) when you are required to work temporarily away from your home depot and/or residence, which does not permit you to return to your home depot and/or residence daily and incur the expense of overnight accommodation and meals, when:

·         you have firstly travelled a minimum number of kilometres from your residence of engagement to the worksite,

·         you work a shift of greater than six hours, and

·         you demonstrate to your employer that via the production of a receipt from a hotel/motel or other commercial accommodation proof of living away from home.

You sometimes incur expenses for accommodation and meals so that you can have a 10 hour break between shifts (including travel time). You do not receive an allowance or any reimbursement for these accommodation and meal expenses.

Your employer provides you with work and safety clothing and protective equipment. You incur additional expenditure on these items as well as on conventional clothing that you wear at work. You incur expenditure cleaning your work clothing.

You purchase stationery items that you use for work purposes.

You incur expenses to maintain certain licences, courses and tickets. Employee training to the benefit of your employer is paid by your employer including re-accreditation of current qualifications.

Your employer(s) do not provide an office space for you at work.

You use your home office for photocopying, printing, scanning and emailing of documents and putting together diagrams that are needed for your work. Your home office is not used for any other purpose.

You own electrical equipment and devices such as a computer, iPad, telephone and two way radio that you use in your employment. You use your personal telephone and home internet connection for work purposes.

You incurred expenditure acquiring work-related equipment.

Your workplace agreements provide that your employer pays you a personal phone allowance (per shift) if they have specifically instructed you to use your personal phone and reimbursement is made in line with work related calls.

Your workplace agreements provide that your employer(s) will provide each employee with all work and safety clothing and protective equipment including Hard hats and protective brim, High visibility reflective safety vests, Safety glasses - Sun UV (Daylight), Safety glasses - Clear (Night) and 30+ UV sunscreen.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 Division 28

Income Tax Assessment Act 1997 Division 40

Income Tax Assessment Act 1997 section 900-35

Income Tax Assessment Act 1997 section 900-115

Income Tax Assessment Act 1997 section 900-125

Income Tax Assessment Act 1997 subsection 900-40(1)

Reasons for decision

You can deduct from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income except where the loss or outgoing is capital or private in nature (section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)).

To be entitled to claim a work-related deduction:

·         you must have spent the money yourself and weren't reimbursed

·         it must directly relate to earning your income

·         you must have a record to prove it.

If the expense was for both work and private purposes, you can only claim a deduction for the work-related portion. Work expenses reimbursed to you by your employer are not deductible.

The Commissioner may seek information from your employer if he thinks you have claimed a deduction for an expense that you have been reimbursed for.

Any deduction claims you make should also reflect your irregular work pattern as a casual employee.

Car expenses

Car expenses incurred to travel to and from work are essentially private in nature and not deductible. However, the Commissioner accepts that car expenses incurred by employees in travelling to and from work are deductible in certain circumstances. One such circumstance is where an employee is required to transport bulky equipment necessary for employment and there is no secure storage available at work.

In your case, your car expenses can be attributed to the transportation of your work equipment rather than your private travel between home and work. Accordingly, you are entitled to a deduction for your car expenses under section 8-1 of the ITAA 1997 to the extent that you use your car for work purposes.

Travel expenses - road and bridge tolls and parking

As noted above, you are entitled to a deduction for your car expenses when you are travelling to and from work, on the basis that the expenses can be attributed to the transportation of your work equipment rather than your private travel between home and work. Expenses you incur for road and bridge tolls and parking fees associated with your home to work travel are also deductible under section 8-1 of the ITAA 1997.

As these expenses relate to specific work travel they will not need to be apportioned; however, you will need to keep written evidence to substantiate the amount of your claim.

Travel expenses - accommodation and meals

Taxation Ruling TR 2017/D6 Income tax and fringe benefits tax: when are deductions allowed for employees' travel expenses sets out general principles for determining whether an employee can deduct travel expenses under section 8-1 of the ITAA 1997. A travel expense includes an expense relating to accommodation and meal expenses of an employee when they travel away from home for work.

An employee's ordinary costs of maintaining a home and consuming food and drink to go about their daily activities are of a private or domestic nature and are not deductible. However, the cost of accommodation and meals incurred by an employee in performing their work activities are 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.

In your case, if you were required to sleep away from home overnight you would receive an allowance to cover your expenses, or your expenses would have been reimbursed.

As such, the expenditure you incur on accommodation and meals when you choose to stay closer to the workplace is not deductible. The expenditure is incurred as a result of your personal choice rather that it being a requirement of your employment.

Work related clothing, sunscreen and laundry expenses

Taxation Ruling TR2003/16 Income tax: Deductibility of protective items sets out the Commissioner's views on the deductibility of expenses incurred to protect from the risk of illness or injury in the course of carrying out income earning activities following the decision in FC of T v. Morris & Ors (2002) 50 ATR 104; 2002 ATC 4404; [2002] FCA 616.

You can deduct expenditure on a protective item you use to protect yourself from the risk of illness or injury if:

·         you incurred the expense

·         there is a sufficient connection between the expenditure and earning your assessable income so that the outgoing is incidental and relevant to the gaining of assessable income, and

·         the expenditure has the essential character of an outgoing incurred in gaining your assessable income.

Expenditure on a protective item will have a sufficient connection with the earning of your assessable income where:

·         you are exposed to the risk of illness or injury in the course of carrying out your income earning activities

·         the risk is not remote or negligible

·         the protective item is of a kind that provides protection from that risk and would reasonably be expected to be used in the circumstances, and

·         you use the item in the course of carrying out your income earning activities.

As noted above, you cannot claim a deduction for expenditure that is of a private or domestic nature. Such expenditure does not have the necessary essential character of an outgoing incurred in gaining your assessable income, even if there is a connection between that expenditure and your income earning activities. This applies particularly to conventional clothing. When you use conventional clothing to protect you while at work, your expenditure on the clothing in most cases will still be of a private or domestic nature because the essential character of the expenditure is that of meeting personal requirements of modesty, decency and warmth.

Although a protective item may be of a kind normally associated with private or domestic use, the nature of your use of that item will in some instances give your expenditure on it the essential character of an outgoing incurred in gaining assessable income. This is a question of fact and depends on the degree to which your work place poses a risk of illness or injury and the degree to which the item protects you against that risk.

In your case, you are entitled to a deduction for the cost of protective clothing and items such as your high visibility work wear, steel capped boots, heavy duty trousers and shirts (as distinct from ordinary trousers and shirts), safety glasses, as well as the cost of any work clothing with your employer's logo on it. It is noted that your Agreements provide that much of the protective clothing required for work will be supplied, or that you will be reimbursed if you incur such expenditure. If your employer has paid all or a portion of these costs, or if the items have been provided by your employer, you can only claim the difference in the cost of the workwear. You are also entitled to a deduction for the cost of sunscreen that is used at work and not reimbursed by your employer.

Conventional clothing you wear at work, such as jeans, drill shirts and shorts, trousers and socks, may have some protective qualities. However, this in itself is not necessarily sufficient to give your expenditure on these items the character of a working expense. The limited level of protection against illness or injury in the workplace which this clothing gives you usually means that the essential character of the expenditure is private. As such, you are not entitled to a deduction for the cost of conventional clothing that you wear at work.

Taxation Ruling TR 98/5 Income Tax: calculating and claiming a deduction for laundry expenses sets out the rules for calculating and claiming a deduction for laundry expenses. Laundry expenses are those expenses to do with washing, drying or ironing clothes but not dry cleaning.

Laundry expenses up to $150

Where the total amount of laundry expenses incurred in the income year is up to $150, there is no need to retain written evidence of each laundry expense - subsection 900-40(1) of the ITAA 1997.

However, a taxpayer may calculate their laundry expenses by keeping written evidence. Written evidence (a document or other records that can be used to demonstrate that the expense was incurred) can be:

·         a document from the supplier of the goods (for example, a receipt) (section 900-115 of the ITAA 1997), or

·         evidence a taxpayer has recorded themselves for small expenses ($10 or less) (section 900-125 of the ITAA 1997).

Where a taxpayer does not keep written evidence of their laundry expenses, the Commissioner will allow a claim of $1 per load (which covers washing, drying and ironing) in situations where only work related clothing is being laundered, and 50 cents per load where both private and work related clothing is being laundered at the same time. This is hereafter referred to as the 'Commissioner's estimate'. If the Commissioner's estimate is used, a taxpayer should keep details of the number of washes that were done during the year, and what type of clothes (work-related, private or both) were included in each wash.

Laundry expenses more than $150

Where the total amount of work expenses incurred in the income year is $300 or less, there is no need for written evidence to be kept for laundry or other work expenses even if the laundry expenses are more than $150 - section 900-35 of the ITAA 1997. A taxpayer may use the Commissioner's estimate of laundry expenses or calculate their laundry expenses by keeping written evidence. However, where the total amount of work expenses is more than $300, then to claim laundry expenses that total more than $150, a taxpayer must keep written evidence of all their laundry expenses (not just the amount above $150).

If you choose a different basis to work out your claim, the Commissioner may ask you to explain that basis.

The Commissioner's estimate is based on the following breakdown of costs incurred per single wash of work related clothes:

You may instead calculate your laundry expenses by keeping written evidence. Written evidence of costs such as cleaning agents (detergents, etc.) may be kept in the form of receipts. Where each expense is $10 or less, and the total of all your small work expenses, not just laundry expenses, is $200 or less for the year of income, then the individual costs may be recorded in a diary and there is no need to keep receipts - section 900-125 of the ITAA 1997.

Electricity expenses may be calculated by reference to the average power consumption for household appliances guide that is available from your local electricity authority. Diaries and other records may also be used to determine the pattern of usage (the Commissioner will accept a diary that has been maintained for a minimum period of one month if it is representative of the normal pattern of usage). Similar calculations should be performed to calculate a claim for water, having regard to the washing machine owner's manual which will provide the amount of water used per load.

Decline in value deductions may also be claimed on items used in the course of washing, drying or ironing clothes (for example, washing machine or dryer). It should be noted that if the intention is to claim decline in value deductions of such items, full documentary evidence is to be kept of the original cost and date of purchase (subject to the application of the Commissioner's discretion in Subdivision 900-H of the ITAA 1997).

Further information on clothing, laundry and dry-cleaning expenses can be found by searching 'QC 31907' on ato.gov.au

Work related equipment (that is not a depreciating asset), self-education courses and stationery

As you are required to have current licences and attend courses and travel to conferences in relation to gaining your assessable income these expenses are deductible as it is accepted the study meets the requirements detailed in Taxation Ruling TR 98/9. Further information about self-education expenses can be found by searching 'QC 31970' on ato.gov.au

The equipment and stationery expenses incurred also directly relate to your income earning activities and are deductible under section 8-1 of the ITAA 1997 to the extent that they are used for work and their cost is not reimbursed by your employer.

Home office running and occupancy expenses

The Commissioner's view about the deductions allowable for home office expenses is in Taxation Ruling TR 93/30 Income Tax: deductions for home office expenses.

As a general rule, expenses associated with a taxpayer's home are of a private or domestic nature and do not qualify as deductions for taxation purposes. An exception to this general rule is where part of the home is used for income producing activities and has the character of a place of business.

Another exception to this general rule is where part of the home is used in connection with the taxpayer's income earning activities but does not constitute a place of business. In this case, a more limited range of deductions may be available.

Whether an area of the home has the character of a place of business is a question of fact which depends on the particular circumstances of each case.

The following factors may indicate whether or not an area set aside has the character of a 'place of business':

·         the area is clearly identifiable as a place of business

·         the area is not readily suitable or adaptable for use for private or domestic purposes in association with the home generally

·         the area is used exclusively or almost exclusively for carrying on a business, or

·         the area is used regularly for visits of clients or customers.

The existence of any of these factors or a combination of them will not necessarily be conclusive in ascertaining the character of an area used as a home office. Rather the decision in each case will depend on whether, on a balanced consideration of:

·         the essential character of the area

·         the nature of the taxpayer's business, and

·         any other relevant factors.

the area constitutes a 'place of business' in the ordinary and common sense meaning of that term.

The deductible expenses in respect of a home office can be divided into two broad categories:

·         Occupancy expenses - expenses relating to ownership or use of a home which are not affected by a taxpayer's income earning activities. These include rent, mortgage interest, municipal and water rates, land taxes and house insurance premiums.

·         Running expenses - expenses relating to the use of facilities within the home. These include electricity charges for heating/cooling, lighting, cleaning costs, depreciation, leasing charges and the cost of repairs on items of furniture and furnishings in the office.

If an area of the home has the character of a place of business, some part of the expenses from both categories may be claimed as a deduction. In most cases the apportionment of expenses should be made on a floor area and, in addition, where the area of the home is a place of business for part of the year, a time basis. However, where an area of the home is simply used in connection with income producing activities, but does not have the character of a place of business, only expenses in the latter category (the running expenses) are allowable. The amounts allowable as deductions are the additional expenses incurred as a result of income producing activities.

In your case, the home office does not have the character of a 'place of business'. There is no signage out the front such that the home is clearly identifiable as a place of business and the home office is not used for customer or client visits. While the home office may be used exclusively or almost exclusively for carrying on the business, the home office is readily suitable or adaptable for use for private or domestic purposes in association with the home generally (and would have the appearance of a private study).

The nature of your work is that all your income producing activities are undertaken at your work locations, and not in the home office. Your circumstances are clearly distinguishable from situations such as a hairdresser with a home salon, a doctor with a home surgery or a tradesperson with a home workshop where income producing activities are being undertaken at home.

While the home office does not have the essential character of a place of business, the office is used in connection with your income earning activities. As such, you are entitled to a deduction for your home office running expenses. Running expenses are the increased costs of using the home's facilities for work-related activities.

Further information about claiming deductions running expenses for an area of a home that is used in connection with income earning activities, including how to calculate claims is available here, or search for 'QC 31977' on ato.gov.au

Decline in value of work equipment (depreciating assets)

A depreciating asset is an asset that has a limited effective life and that is reasonably expected to decline in value over the time it is used.

The cost of purchasing an asset is generally of a capital nature and is therefore not immediately deductible as an expense under section 8-1 of the ITAA 1997. However, Division 40 of the ITAA 1997 allows a deduction for the decline in value of a depreciating asset used for income producing purposes. The amount of the deduction is determined by the cost of the asset, its effective life and the percentage of taxable purpose the asset is used for.

The decline in value of certain depreciating assets costing $300 or less is their cost. This means you get an immediate deduction for the cost of the asset to the extent that you use it to produce assessable income, during the income year in which the deduction is available.

The immediate deduction is available if all of the following tests are met in relation to the asset:

·         it cost $300 or less

·         you used it mainly for the purpose of producing assessable income that was not income from carrying on a business

·         it was not part of a set of assets costing more than $300 that you started to hold in the income year, and

·         it was not one of a number of identical, or substantially identical, assets that you started to hold in the income year that together cost more than $300.

In your case you use equipment such as a computer, phone, iPad, two way radio and other electrical devices in the performance of your employment duties. These items are reasonably expected to decline in value over time and are therefore considered to be depreciating assets for the purposes of Division 40 of the ITAA 1997.

Consequently you are entitled to claim a deduction for the decline in their value to the extent that they are used for income producing purposes and the cost of these items has not been reimbursed by your employer. You will also need to apportion your deduction to exclude any private use.

Further information can be found in the ATO's Guide to depreciating assets which is available here or by searching 'QC 58646' on ato.gov.au

Child minding fees

For an expense to be deductible under section 8-1 of the ITAA 1997 there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income (Ronpibon Tin NL & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431; (1949) 4 AITR 236), and the expenditure must not be capital, private or domestic in nature.

The Courts and tribunals have consistently decided that parents are not entitled to a deduction for child-minding or baby-sitting expenses. In Lodge v. FC of T (1972) 128 CLR 171; 72 ATC 4174; 46 ALJR 575; 3 ATR 254 (where the taxpayer worked under contract from home, and to enable her to carry out her duties effectively, she sent her child to a child nursery) the High Court held that child care expenditure was neither relevant nor incidental to gaining or producing assessable income and was therefore not an allowable deduction. The High Court also held that the expenditure was also of a private or domestic nature.

Your child minding fees are a prerequisite to earning or producing your assessable income. There is nothing about this expenditure that is relevant or incidental to the work you perform in your employment. In addition, the costs of child minding are private or domestic in nature. You are not entitled to a deduction for your child minding fees.

Dog related expenses

There must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income (Ronpibon Tin NL & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431; (1949) 4 AITR 236), and the expenditure must not be capital, private or domestic in nature.

A dog is ordinarily considered a pet and therefore expenses incurred in relation to a dog are generally not deductible as they are private or domestic in nature and not sufficiently connected to the earning of assessable income. However, in some instances a dog is considered a working beast or item of plant for a business, for example, a guard dog used to provide security for business premises that remains on site at all times and a working dog used to muster stock. An animal does not qualify as plant unless it is used in a business (Case M59, 80 ATC 409 and Case M72, 80 ATC 497).

In your case, the dogs live at your residence and also come with you to work at times to act as a guard dog. They protect you at times when you go to put hand signallers in place and other times to guard your home when your child and babysitter are at home alone.

In your case, your dogs are not considered to be a working beast or an item of plant for any business. The fact that you take your dogs to work at times does not change the fact that your dog's are kept at your residence and are regarded as pets and a private expense. Whilst it is acknowledged that your dogs may protect you at times, they also protect your residence and personal belongings. Your dogs are privately owned and there is no connection between the expenses incurred to maintain them and the gaining of your assessable income.

While it is appreciated that the dogs may perform some guard functions the costs of maintaining them are private in nature. Accordingly, you are not entitled to a deduction for the cost of maintaining your dogs.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).