Edited version of private advice

Authorisation Number: 1051836204119

Date of advice: 7 May 2021

Ruling

Subject: Travel expenses

Question

Are you entitled to claim a deduction for your travel expenses to and from work?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ending 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You commenced work with your employer in XXXX and was based at site 1.

Your work was Monday to Friday, home each night and you had a company car for your travel.

You set up home in site 1.

In XXXX your employer purchased the company XXXX.

You were then directed to work at Site 2.

You are engaged on a Drive In, Drive Out (DIDO) arrangement on 15 days on, 13 days off roster.

Initially you shared a company vehicle with other employees.

A vehicle was not provided to you for your separate use.

Your duties have remained the same.

Your original contract with your employer states that other areas that you may be required to work (other than Site 1) are a number of other sites.

Under the contract, you can basically be asked to work on any site in Australia.

While at Site 2 you live in the camp provided by the company.

Under company rules, you are not allowed to travel home at the end of each day's work. The only days of travel is at the start and end of shifts.

You state in your ruling application that you are paid from when you leave your home.

The letter from your employer dated 5 May 20XX states that you are required to use your personal vehicle to and from your home address, to your work base, for each roster.

You commenced this arrangement driving to and from the work site in the 20XX income year.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

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.

Travel Expenses

In considering the deductibility of travel expenses, a distinction is made between travel to work and travel on work. It is only if the duties of the job require a taxpayer to travel that the taxpayer's expenses can be deducted.

A deduction is generally not allowable for the cost of travel by an employee between their home and their normal workplace as it is considered private in nature. The cost of such travel is generally incurred to put the employee in a position to perform their duties of employment, rather than in the performance of those duties (paragraph 77 of Taxation Ruling TR 95/34).

Lunney v. Commissioner of Taxation [1958] ALR 225; 1958 0311H HCA; 100 CLR 478; (1958) 11 ATD 404; (1958) 32 ALJR 139 introduced what is now regarded as the essential character test. This test requires that for an expense to be deductible, it must have the essential character of a business or income producing expense. The taxpayer in this case sought to deduct the cost of travelling from his home to his work. The expenses were disallowed as being private and domestic, establishing the broad principle that costs incurred because of living in one place while working in another cannot be regarded as deductible. The reasons given by the High Court were twofold.

The fact that certain expenditure, such as travelling to work, must be incurred in order to be able to derive assessable income, does not necessarily mean that the expenditure is incidental and relevant to the derivation of assessable income. It is a prerequisite to the earning of assessable income rather than being incurred in the course of gaining that income.

The essential character of the travel to and from work is that of a private and domestic nature, related to personal and living expenses as part of the taxpayer's choice of where to live, in choosing to live away from and what distance from work.

The Commissioner has recently issued ruling TR 2021/1 Income tax: when are deductions allowed for employees travel expenses? in which the principles for determining whether an employee can deduct travel expenses under section 8-1 ITAA 1997 is discussed in detail. Specifically, paragraphs 24 - 28 of TR 2021/1 in respect of regular place of work.

24. 'Regular place of work' is a concept used in this Ruling to assist in identifying whether certain travel is incurred in gaining or producing assessable income.

25. Most employees have a regular place of work, being a usual or normal place where the employee starts and finishes their work duties with a particular employer.

26. In most cases, identifying an employee's regular place of work is clear. In circumstances where it isn't clear, it may be necessary to consider in more depth the contract of employment, customary practice, the nature of the work duties, where these duties commence and at what point in time the employee is under the direction and control of their employer in order to determine where the employee's regular place of work is.

27. In some employment arrangements there may be more than one regular workplace established.

This may be expressly provided for in the employment agreement or contract between the employer and employee, or it may arise as a matter of practice

in the relationship between employer and employee. A second or subsequent place of work would be a regular place of work if it is also a normal or routine

place where the employee works, such that travelling between there and the employee's home is better characterised merely as part of the necessity of travelling to and from work.

28. The usual position that the cost of travel between home and the employee's regular place of work is not deductible does not change merely because the employee's home is very distant (for example, requiring a flight) from their regular place of work.

For example, an employee takes a job based wholly in Sydney but chooses to continue to live in Brisbane with their family and flies to their work in Sydney each week the location of the employee's home or their regular place of work limits the choices of travel, for instance if no public transport is available or their regular place of work can only be reached by a particular mode of transport such as a boat.

In your circumstances your contract clearly states that you may be expected to work at other sites from time to time.

Site 2 is one of those sites that you are expected to work in.

Site 2 is now your regular workplace and has been your regular workplace for a number of years.

The travel from Site 1 to Site 2 puts you in a position to be able to carry out your work duties and is not travel required as part of those work duties.

The expenses you incur in travelling between your home to your workplace are private in nature.

This travel you do at the beginning and end of your roster is no different from that experienced by every worker who works somewhere other than their home.

People need to travel to their workplace to be able to commence their work activities.

You state that you are being paid when you are driving to and from your workplace.

However, this is not reflected in your employment contract or in the letter provided from your employer.

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

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