Edited version of private advice

Authorisation Number: 1051813982563

Date of advice: 16 March 2021

Ruling

Subject: Deductions - self-isolation expenses

Question

Can you claim a deduction for your Self-isolation expenses?

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 are an employee.

Your home residence is in one state.

Your place of work is in another state.

You are a Fly in fly out worker.

The cost to travel from the first state to the second is incurred by yourself.

You commence work when you arrive on site.

On competition of your work rotation, you generally fly home to the first state, at your own expense.

Due to Covid-19, on arrival in the first state you would be required to self-isolate for 2 weeks.

When you travel back to the second state for work from the first state, on arrival you would be required to self-isolate for another 2 weeks.

As a result of the potential 4 weeks of self-isolation, you chose to stay in the second state so you were not required to self-isolate.

Due to staying in the second state and not flying home, you incurred additional Accommodation expenses (your Self-isolation expenses).

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

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

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 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.

Ordinarily, any stopover in the second state would be part of your travel from home to work. But you chose to live away from your home in the first state while you were rostered off due to the Covid-19 quarantine requirements. We consider both the travel and accommodation perspectives when determining if your expenses are deductible or private.

In the case of John Holland Group Pty Ltd & Anor v Commissioner of Taxation, the case involved particular FIFO employment arrangements which meant that the air travel provided by the employer was not exempt under subsection 47(7) of the FBTAA. This was because the usual place of employment was adjacent to an eligible urban area as defined (see section 140 of the FBTAA).

The decision of the Full Court clarifies the law regarding the deductibility of travel expenses. As concluded by the Full Court, the case under consideration in Lunney was of 'ordinary people' paying fares 'to enable them to go day by day to their regular place of employment or business and back to their homes'; it was not about the specific demands occasioned by employment that required, as part of the employment, travel to a remote place.

The employees in this case were required by their employer, as part of their employment duties, to travel each way between the airport and the project accommodation at a remote location. This travel occurred during working time while the employees were rostered-on and paid. This travel did not include the private travel between the employee's home and the airport.

This was a case of well settled law being applied to a new factual situation. Such matters can involve questions of fact and degree and different facts may result in different conclusions as to deductibility.

Draft taxation ruling TR 2021/D1 Income tax and fringe benefits tax (a consolidation of various other previous applicable rulings):accommodation and food and drink expenses, travel allowances, and living-away-from-home allowances. (TR 2021/D1) Explains when an employee

•         Can deduct accommodation and food and drink expenses under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) when they are travelling on work, including where it is necessary to apportion.

•         The fringe benefits tax (FBT) implications, including the application of the 'otherwise deductible rule', where an employee is reimbursed for accommodation and food and drink expenses, or where the employer provides or pays for these expenses.

•         The criteria for determining whether an allowance is a travel allowance (as defined in ITAA 1997 subsection 900-30(3) or a living-away-from-home allowance (LAFHA) benefit (see section 30 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)) and the differences between them.

The following paragraphs from TR2021/D1 relate to your circumstances;

Paragraph 13.

Living expenses are a prerequisite to gaining or producing an employee's assessable income and are not incurred in performing an employee's income-producing activities. Living expenses are also private or domestic in nature. This means that even if these expenses were incurred in gaining or producing assessable income, they still would not be deductible due to the application of paragraph ITAA 1997 8-1(2)(b).

Paragraph 14.

While living expenses must be incurred before any assessable income can be derived, a loss or outgoing is not incurred in gaining or producing an employee's assessable income merely because it is necessary. This is particularly relevant to living expenses. A person must eat and sleep somewhere, whether or not they engage in employment.

Paragraph 24.

An employee cannot deduct accommodation and food and drink expenses they have incurred where, due to their personal circumstances, they live far away from where they gain or produce their assessable income. These expenses are living expenses and are not deductible.

Paragraph 25.

In these circumstances, the expenses are incurred because the employee's personal circumstances are such that they keep their usual residence, rather than relocate. The occasion of the outgoing for accommodation and food and drink is not found in the employee's income-producing activities, meaning that these expenses are not incurred in the course of gaining or producing the employee's assessable income. They are private and domestic in nature.

In your case, you live in the first state and work in the second state, it is your choice to live a large distance from your employment. As the additional expenses you incurred due to Covid-19, were incurred after you finished your work, and not in the course of work, your accommodation and incidental expenses are considered to be private in nature. Accordingly, you are not entitled to a deduction for your expenses under section 8-1 of the ITAA 1997.

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