Edited version of private advice

Authorisation Number: 1052391521809

Date of advice: 02 May 2025

Ruling

Subject: Deductions - travel allowance

Question 1

Are you entitled to claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the travel expenses you incurred overseas?

Answer 1

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

XX 20XX

Relevant facts and circumstances

From XX 20XX to XX 20XX, you were employee of Company X, Country Y

You worked as Manager position, full-time based, Country Y.

Your home is in Australia.

You are required to live in Country Y to work. Your employment contract was ending on XX 20XX

In Country Y, your employer provided accommodation for you.

Your monthly payments included some allowances.

You were using your leave period to visit your family in Australia.

During your leave periods, you are required to remotely attend to all your meetings, checking email.

Relevant legislative provisions

Income tax assessment Act 1997 section 8-1

Reasons for decision

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoing 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 related to earning of exempt income.

Taxation Ruling 2021/4 Income tax and fringe benefits tax: employees: accommodation and food and drink expenses travel allowances, and living-away-from-home allowances (TR 2021/4) explains when an employee can deduct accommodation and food and drink expenses under section 8-1 of the ITAA1997 when they are travelling on work.

Paragraph 40-44 of Tax ruling 2021/4 states

40. However, where an employee is living at a location away from their usual residence, their accommodation and food and drink expenses are living expenses and will not deductible even if the employees is living at that location due to their employment.

41. This is because, where the location at which the employee works has become their new regular place of work, the accommodation and food and drink expenses are not an incident of their income-earning activity. Rather, the employee's personal circumstances are such that their usual residence is not located near their new workplace. Consequently, the employee is living at a location away from their usual residence and their accommodation and food and drink expenses will not be deductible.

42. The following factors would support a characterisation of an employee as living at a location away from their usual residence:

•                    there is a change in the employee's regular place of work

•                    the length of the overall period the employee will be away from their usual residence is a relatively long one

•                    the nature of the accommodation is such that it becomes their usual residence

•                    whether the employees is, or can be, accompanied by family or visited by family and friends.

43. An employer will generally provide accommodation and food and drink or pay the employee an allowance to cover the additional living expenses the employee might reasonably be expected to incur where they are required to live at a location away from their usual residence to perform their duties. An employer may also reimburse the employee for the expenditure they have incurred on accommodation and food and drink.

44. All the factors in paragraph 42 of this Ruling should be considered and no single factor is necessarily decisive. The weight given to each factor will vary depending on the employee's individual circumstances and is not a mathematical process. Reaching a conclusion as to whether an employee is living at a location away from their usual residence is a matter of judgment which requires a holistic assessment based on a consideration of all the factors.

For further information about the TR 2021/4, please visit the Legal Database on the ATO website ato.gov.au and search for 'TR 2021/4'.

Application to your circumstances

You were living at a location away from your usual residence for relatively long period due to your employment. The new location became your new regular place of work. The expenses incurred while living at this regular place of work are considered living expenses and are not deductible.

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