Edited version of private advice

Authorisation Number: 1052130004329

Date of advice: 19 June 2023

Ruling

Subject: Travel deductions

Question

As a medical practitioner, is travel, food and accommodation for regular monthly work as a visiting medical officer under a sole trader contract, a deductible expense?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2022

Year ending 30 June 2023

The scheme commence d on:

1 July 2021

Relevant facts and circumstances

You are a medical practitioner.

You work as a sole trader in your home location and maintain a place of residence there. Additionally, you operate as a sole trader under a contract at another location to see patients in the public sector and see private patients at the same location.

You travel interstate monthly to work at the location of your contract and also attend to the private patients during that time.

You have a contract for a defined period. Your rate of pay is set out in the contract.

You incur regular accommodation and travel expenses each month when travelling to undertake this work including flights, accommodation and meals. This arrangement has been in place for a period of time.

You believe that this experience is vital to maintain skills and expertise in this area.

You maintain that you have a full load of work at your home location and do not need the work in the second location to supplement your income and that it is purely to maintain skills. There is no formal qualification or certificate attained for this work. It is just exposure and experience working with these patients that are not common at your home location.

You provided a:

•                     contract covering the interstate arrangement

•                     typical schedule of your work as an employee and for your sole trader work activities

•                     a remittance advice, recipient created tax invoices and claims details reports.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 25-100

Reasons for decision

Summary

In considering the deductibility of travel expenses a distinction is made between travel to work and travel on work. A deduction is generally not allowable for the cost of travel between home and work because the expenses are private in nature and are not considered to be incurred in producing assessable income.

Detailed reasoning

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

Section 25-100 of the ITAA 1997 specifically states that travel between two places is not travel between workplaces if one of the places you are travelling between is a place at which you reside. This provision denies a deduction for your travel expenses between home and your workplace, even if you carry out activities at home related to your work. The conduct of some work activities while travelling (for example, answering emails on the plane) does not convert the travel to being part of the employment if it otherwise private. The travel itself is a prerequisite to commencing work duties at the second location.

A deduction is generally not allowable for the cost of travel between home and the normal workplace as it is considered to be a private expense and not incurred in producing assessable income. A loss or outgoing is not incurred in gaining or producing assessable income merely because it is necessary. This is particularly relevant to living expenses. 'Expenditure on accommodation and meals ordinarily has the character of a private or domestic expense' (paragraph 88 of Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business). These costs are preliminary to the work and are not incurred in the course of performing those activities.

Expenses that are incurred as a consequence of living in one place and working in another and any expenses incurred to enable a taxpayer to commence their income earning activities are considered private in nature.

Paragraph 6 of Taxation Ruling IT 2543 Income tax: transport allowances: deductibility of expenses incurred in travelling between home and work states:

The mode of transport, the availability of transport, the lack of suitable public transport, the erratic hours and times of employment, the on-call nature of the employment, the time of travel, the distance of travel, the unavailability of residential accommodation near the place of work, the frequency of travel and the necessity of travel are not factors which will alter the essential character of travel between home and work.

The cost of travel between home and work is generally incurred to put a person in a position to perform duties, rather than in the performance of those duties.

You have a main residence and have taken contract work in another location. This travel is not considered to be work-related travel. The costs are not incurred in the course of gaining or producing assessable income. The accommodation expenses incurred are private or domestic in nature as you have made a choice to work away from your normal place of residence to take up the position in another location for a long period. The fact that there may be some professional development opportunities in undertaking the position does not change the nature of the travel for this long-term undertaking.

In addition to your duties as a visiting medical officer in the other location, you also schedule for private patients to be seen at the public hospital. This once again would not change the nature of your expenditure incurred as it a choice to perform work at a location that is not where your main residence is.

Altering the duration of the contract to accept smaller contracts would also be seen to not allow the deduction as your business does not require you to travel to another city for work. The regularity with which you travel would also exist and seen to be the norm.

Consequently, the expenses you incur in travelling between home and your workplace and back home are inherently of a private or domestic in nature and no deduction is allowable under section 8-1 of the ITAA 1997.

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