Edited version of private advice

Authorisation Number: 1052248691109

Date of advice: 14 May 2024

Ruling

Subject: Work related expenses - motor vehicle

Question

Can the taxpayer claim work related car/travel expenses under section 8-1 of the Income Tax Assessment Act 1997?

Answer

No. Travel from your home to the worksite is considered a private expense and is not deductible.

This ruling applies for the following periods:

30 June 20XX

The scheme commenced on:

XX XXX 20XX

Relevant facts and circumstances

You are employed by XXX Pty Ltd as a Project Manager.

You commenced working with XXX Pty Ltd in XXX 20XX

You have advised that whilst you have an office, you travel from your home to conduct the site visits.

Due to the nature of your role, you are required to travel between multiple sites for meetings and site inspections to ensure the successful delivery of the projects.

The sites and projects are in different locations and multiple site visits are required daily.

You are unable to use public transport due to the time constraints and some of the newer sites are in areas where there is no public transport access.

The employer does not provide company vehicles for staff members. Staff are expected to use their own car and have an appropriate driver's licence to travel and complete the site visits.

You are claiming expenses for your own motor vehicle.

You can substantiate car expenses and provided a logbook as reference.

You carry bulky tools and equipment such as, safety boots, helmet, drawing board, sledgehammer, measuring tape, landscape maintenance knife/scissors.

You carry these tools to maintain some of the site works that are not covered by the maintenance crew.

You also deliver, install, and reinstate some of the signage such as sales boards and tree stakes.

Relevant legislative provisions

Income Tax Assessment Act 1997 - Section 8-1

Taxation Ruling2020/1

Taxation Ruling 2021/1

Taxation Ruling IT 2543

Does IVA apply to this private ruling?

No.

Reasons for decision

Summary

Can the taxpayer claim work related car/travel expenses under section 8-1 of the Income Tax Assessment Act 1997?

Detailed reasoning

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except when the outgoings are of a capital, private or domestic nature.

Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses, provides that a deduction is generally not allowable for the cost of travel by an employee between home and their normal workplace as it is considered to be a private expense. The cost of travel between home and work is generally incurred to put the employee in a position to perform duties of employment, rather than in performance of those duties.

Paragraph 14 of TR 2021/1 Income Tax: when are deductions allowed for employees' transport expenses? provides:

The deductibility of transport expenses where the employee is travelling between home and a regular place of work has long been regarded as settled. With limited exceptions, such expenses are not deductible. Lunney, the leading judicial decision on the matter, states:

It is, of course, beyond question that unless an employee attends at his place of employment he will not derive assessable income and, in one sense, he makes the journey to his place of employment in order that he may earn his income. But to say that expenditure on fares is a prerequisite to the earning of a taxpayer's income is not to say that such expenditure is incurred in or in the course of gaining or producing his income... Expenditure of this character is not by any process of reasoning a business expense; indeed it possesses no attribute whatever capable of giving it the colour of a business expense. Nor can it be said to be incurred in gaining or producing a taxpayer's assessable income or incurred in carrying on a business for the purpose of gaining or producing his income; at the most, it may be said to be a necessary consequence of living in one place and working in another.

Paragraphs 5 and 6 of Taxation Ruling IT 2543 Income Tax: transport allowances: deductibility of expenses incurred in travelling between home and work provided the following:

"It is, of course, beyond question that unless an employee attends at his place of employment he will not derive assessable income and, in one sense, he makes the journey to his place of employment in order that he may earn his income. But to say that expenditure on fares is a prerequisite to the earning of a taxpayer's income is not to say that such expenditure is incurred in or in the course of gaining or producing his income."

The general principles established in Lunney and Hayley and the exceptions to these principles are dealt with in detail in the above two Taxation Rulings.

6. The principles outlined in Lunney and Hayley on the deductibility of costs of travel between home and work have again been considered in recent decisions of the Administrative Appeals Tribunal (Case T100, Case U156, Case V103, Case V111 and Case V131) and by Northrop J. in F.C. OF T. v Genys 87 ATC 4875; 19 ATR 356. The decisions help to clarify the application of these principles to factual situations where abnormal expenditure is incurred in travelling between home and work. In particular they confirm that:

•         Lunney and Hayley establishes that the fundamental test in determining the deductibility of an expense under subsection 51(1) is the essential character of that expense. Further, the essential character of expenditure incurred in travelling between home and work is of a private nature (Genys Case, Case T100 and Case U156);

•         generally, the duties of a salary and wage earner will not commence until the arrival at a place of work and will cease upon departure from work (Case U156);

•         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 (Case U156, Case V103, Case V111 and Case V131).

Transport of bulky equipment

You may be able to claim a deduction for the cost of travel between your home and workplace if you need to carry cumbersome, heavy, or bulky tools or equipment, rather than travel to and from work, which is essentially considered of a private nature.

However, the following conditions need to be met:

•         The tools or equipment are essential to perform your work.

• The tools or equipment are bulky, meaning that:
  • They are awkward to transport because of their size and weight.
  • They can only be transported conveniently using a motor vehicle.
• There is no secure storage for such items at the workplace.
• You do not transport tools or equipment as a matter of choice (for example if your employer provides secure storage and you choose to take the tools home instead of using this storage).

If you claim a deduction you need to keep a record of:

•         All work items that you carry.

• The size and weight of all work items.
• Evidence that the items you carry are required and essential for your work.
• Evidence that your employer does not provide suitable secure storage at the workplace.

In the case of FC of T v. Vogt 75 ATC4073: (1975) 5 ATR 274 (Vogt's Case) a deduction was allowed because the expense could be attributed to the transportation of bulky equipment (musical instruments) to varying places of work, rather than to private travel between home and work.

The decision in Vogt's case is authority for the proposition that where a taxpayer keeps necessary equipment at home which is needed for performing work and by reason of their bulk need to be transported by vehicle from home to their places of work, then the expenses maybe characterised as travel 'on work' and therefore maybe deductible.

In AAT case 46/94 (1994) 94 ATC 387 the taxpayer, a flight attendant with the Royal Australian Air Force, was denied a deduction for the cost of transporting items required to and from work in a duffle bag, a briefcase sized navigational bag and on occasions a suit bag. The duffle bag when packed weighed 20 kilograms and measured 75cm long, 55cm wide and 50cm deep. The suit bag weighed 10 kilograms.

It was held that the mode of transporting the items was simply a consequence of means adopted by the taxpayer to convey him to work. It was considered that the duffle bag was not of sufficient size or weight to impede effortless transport.

For further information on the transporting of bulky tools and equipment please refer to our website ato.gov.au - page reference QC 72122. This page explains in detail the conditions required to be able to claim this as deduction and provides examples and videos as further references.

In your case you carry work related equipment in your motor vehicle from home to varying worksites. The items that you carry are not considered to be sufficiently bulky or heavy to impede effortless transport to be carried in your motor vehicle. Therefore, your transport costs are considered to be of a private nature and are not deductible.

The cost of travel between your home and work is commonly experienced by you, as the employee, in a position to perform your duties of employment, rather than in the performance of those duties. As your travel is between your home and worksites, and rarely between your home the office and worksites, the travel is considered to be private in nature and travel expenses are, therefore, not deductible.

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