Edited version of private ruling

Authorisation Number: 1011616966443

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Ruling

Subject: Deduction- travel expenses

Question

1. Are you entitled to a deduction for expenses incurred for home to work travel?

Answer: No.

2. Are you entitled to a deduction for expenses incurred in travelling between two separate workplaces where you carry out substantial work duties at both locations?

Answer: Yes.

3. Are you entitled to a deduction for expenses incurred in travelling to your business premises when you do not carry out substantial work duties and then travel to another workplace?

Answer: No.

4. Are you entitled to a deduction for business and work related mobile telephone expenses?

Answer: Yes.

This ruling applies for the following period:

Year ended 30 June 2010

The scheme commenced on:

1 July 2009

Relevant facts:

You reside at location A.

You operate a business as a sole trader at location B.

The business receives income for providing services to general public and business entities.

You provide services to business entities located at locations C and D.

You invoice the business located at D for the services you provide and are paid a fee for your services.

You also had undertaken employment part time at location E.

You travelled from your home to locations B, C, D and E.

You do not carry any equipment when travelling from home to locations B, C, D and E.

You do not undertake any work activities at home for business located a locations B, C, D and E.

You sometimes travel from home to your place of business at location B to check your appointments and paper work and then continue on to your other work places located at locations C, D and E.

You are not reimbursed or receive a travel allowance from your employer or the businesses you provide services to.

You have kept a diary of your appointments and travel on your computer.

You have incurred mobile telephone expenses in relation to your business and contracting work.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5.

Income Tax Assessment Act 1997 section 8-1.

Reasons for decision

Travel expenses

According to section 8-1 of the ITAA 1997, you can deduct a loss or outgoing if it is incurred in producing your assessable income except where the outgoing is of a capital, private or domestic nature.

Generally the expenses of travel between work and home are not deductible (Lunney & Haley v. Federal commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404 (Lunneys Case)). The general rule, as discussed in Taxation Ruling IT 2199 (IT 2199), is that travel between home and a person's regular place of employment or business is ordinarily private travel. While travel to work is a necessary pre-requisite to earning income, it is not undertaken in the course of earning that income.

However there are situations where it has been accepted that travel by employees from home to work is deductible. These are if:

· the employee's home constitutes a place of employment and the travel is to a work place to continue work

· the employee's employment is inherently of an itinerant nature

· the employee has to transport by vehicle bulky equipment necessary for employment

· travel is between two places of employment.

The facts of your case indicate your home is not considered a place of business and your work had not commenced before leaving home. Your income earning activities are not considered to be itinerant in nature and you do not carry any work equipment which is bulky in nature. However, you are required to attend a number of different employment locations during the day.

Home to work

In your case, you are engaged in a number of income earning activities and travel to a number of work locations. Therefore where you travel directly from your home to either your business premises or to any other work place this travel is not deductible under section 8-1 of the ITTA 1997 as it is considered private in nature.

Travel between two separate work places

A deduction is generally allowable for the cost of travelling directly between two separate work places. Taxation Ruling IT 2199 provides the Commissioner's view on allowable deductions for travel expenses between places of work. Paragraph 4 states:

Claims for income tax deduction for expenses incurred in travelling directly between two places of employment, two places of business or a place of employment and a place of business should be allowed where the taxpayer does not live at either of the places the travel has been undertaken for the purpose of enabling the taxpayer to engage in the income producing activities.

For direct travel between two places of employment to be deductible, the expenses must be incurred in gaining or producing assessable income. To be undertaking income producing activities, you must engage in substantial work duties at both locations before the expenses you incur to travel directly between your work locations will be allowable as a deduction.

What amounts to substantial work is a matter of fact and degree. For example, where an employee travels to his place of employment and merely performs incidental tasks en route such as collecting newspapers or mail, the travel would not be accepted as business travel.

Similarly, MT 2027 provides a further example of a dentist, calling in at a dental laboratory to collect dentures etc, en route to the surgery at which he or she is employed and the activity of collecting dentures would not result in the trip being accepted as business travel.

In your case, completing general administrative tasks such as checking appointments or merely picking up or dropping off paper work do not constitute substantial duties. In comparison, when you are required to attend to or call clients, complete paper work and carry out your required duties at these locations, it is considered that you will be undertaking substantial work duties.

Therefore, when you engage in substantial duties at your business premises and at either of the following locations C, D and E the costs you incur to travel directly between these locations will be deductible under section 8-1 of the ITAA 1997. However, any travel to home directly from your business premises or any other work locations is not deductible as this is considered normal home to work travel.

Note: In claiming a deduction when travelling between your work places, the travel expense is properly referable to the income activity you are travelling to. For example: where you travel from the business to location E the travel expense is deductible against the income earned at location E.

Mobile telephone expenses

You can claim a deduction for the cost of business or work-related telephone calls under section 8-1 of the ITAA 1997. Work-related calls can be identified from an itemised telephone account or estimated based on diary entries of calls made over a one month period along with the relevant telephone accounts.

You can claim a deduction for your telephone rental if you can show that you are required to telephone your employer or business clients while you are away from your place of employment.

To calculate the business percentage of phone rental charges that a business can claim, the following formula is used:

(Business Calls Charges/ Total Calls Charges) x 100

The percentage calculated above is then multiplied by the phone rental costs to calculate the amount of deduction the business is entitled in relation to phone rental.

If you also use your telephone for private purposes, you must apportion the cost of the telephone rental between work-related and private use.

You cannot claim a deduction for the cost of installing or connecting a telephone or mobile phone, even if it is used for work-related calls, as these expenses are of a private nature and not deductible under section 8-1 of the ITAA 1997.

In your case, you have indicated that you have used your mobile telephone for business and work related purposes. You will need to apportion the use of the telephone between the relevant business and work related use for each income earning activity. Any allowable deduction should be claimed against the relevant income from that activity.