Edited version of private advice

Authorisation Number: 1051779553555

Date of advice: 16 November 2020

Ruling

Subject: Work related accommodation expenses

Question

Are your accommodation expenses deductible in accordance with section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You work as a Marine Pilot on a X day on and X day off roster.

When you are rostered on, you are on call during the whole period.

You work between two harbours (harbour 1 and harbour 2).

Whilst on rostered days and on call, you must be available 24 hours a day and will be required to travel to all harbour locations within the two harbours.

Your main residence is approximately XX kilometres from harbour 1 and XX kilometres from harbour 2.

Your employer has Fatigue Management Guidelines (the guidelines) that require you to manage fatigue to ensure you perform your role safely.

The guideline also details specific policies and procedures your employer uses to manage employee fatigue.

You have purchased an apartment for when you are work at harbour 2 to assist you manage fatigue appropriately instead of driving home.

You have incurred expenses in relation to the apartment for mortgage interest, electricity, strata fees, and council and water rates.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Further issues for you to consider

We have limited our ruling to the questions raised in your application. There may be related issues that you should consider including:

•         To determine whether you are an itinerant worker and entitled to travel expenses, Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses (TR 95/34) provides some guidelines to assist.

You may apply for another ruling on these or any other matters.

Reasons for decision

Section 8-1 of the ITAA 1997 allows a deduction for a loss or an outgoing to the extent to which it is incurred in gaining or producing assessable income, except where the loss or outgoing is of a capital, private or domestic nature.

In general, accommodation expenses are considered private expenses and consequently are not deductible. Court decisions and decisions of the Administrative Appeals Tribunal/Board of Review provide an independent view and confirm this.

The Federal Court decision in FC of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466, held that expenses incurred in relation to accommodation near the workplace while maintaining a family residence in another location, were not an allowable deduction as they are considered to be private expenses. Although the expenditure must be incurred in order to put one in a position to be able to derive assessable income, it does not necessarily mean that the expenditure is incurred in the course of gaining or producing that income.

In your case, whilst the accommodation expenses you incurred was to enable you to stay in a close proximity of your work location for convenience to earn an assessable income, it is not necessarily required in gaining or producing that income. Additionally, your employer provides sufficient travel time in consideration of the fatigue conditions and have additional policies in place in the case that a Pilot is considered too fatigued to perform their employment duties.

Therefore, the Commissioner considers that your accommodation expenses are incurred as a matter of convenience and they are not expenses incurred in the course of gaining or producing your assessable income.

Consequently, you are not entitled to a deduction for accommodation expenses under section 8-1 of the ITAA 1997.

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