Edited version of private ruling

Authorisation Number: 1011634463814

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Ruling

Subject: Work related expenses

Questions:

Are you entitled to a deduction for motor vehicle and airfare expenses incurred to travel to your part time work as a self education expense?

Answer:

No.

Are you entitled to a deduction for motor vehicle and airfare expenses incurred to travel to your part time work as a work related travel expense?

Answer:

No.

This ruling applies for the following period

Year ended 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts

You are currently a full time student, studying to be an engineer.

You are required to complete work in the field of your study as part of course.

You worked as a X worker as part of your study.

You incurred motor vehicle and airfare expenses to travel to the site.

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings 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.

Self education expenses

Self-education expenses are deductible under section 8-1 of the ITAA 1997 where they have a relevant connection to the taxpayer's income earning activities at the time the study is undertaken.

Taxation Ruling TR 98/9 considers the deductibility of self education expenses and states that if a taxpayer's income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of self education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction.

However, no deduction is allowable for self-education expenses if the study is to enable a taxpayer to get employment, to obtain new employment or to open up a new income-earning activity (whether in business or in the taxpayer's current employment). This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

The decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 establishes the principle that no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to get employment or to obtain new employment. Such expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

Example: Shannon, who is undertaking a 4-year university degree in mining engineering, takes a job as a casual employee with a mining company during the end of year holiday period. It is the company's policy to take only students who are pursuing relevant studies. Shannon is not entitled to a deduction for the cost of the course because the study is designed to get future employment in the field. It is incurred at a point too soon.

We believe that Maddalena also supports our view that no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to open up a new income-earning activity, whether in business or in the taxpayer's current employment.

In your case, you began your full time study to become an engineer before you began working in at the site. There was no relevant connection between your income earning activities and your study at the time the study is undertaken. Therefore, you are not entitled to a deduction for travel expenses to work as a self education expense under section 8-1 of the ITAA 1997.

Travel expenses

Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example unless a person arrives at work it is not possible to derive income. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income. Rather, the expenses are incurred to enable the taxpayer to commence income earning activities (Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166).

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, rather than in performance of those duties (see Taxation Ruling TR 95/34).

The lack of suitable public transport, the erratic hours and times of employment, the time of travel, the distance of travel and the unavailability of residential accommodation near the place of work are not factors which will alter the essential character of travel between home and work. However, there are situations where it has been accepted that travel by employees from home to work is deductible. This is where:

· the employees home constitutes a place of employment and travel is to a workplace to continue work

· the employees employment is inherently of an itinerant nature, or

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

Home constitutes a place of employment

There is nothing to suggest that your home constitutes a place of employment.

Employment is inherently of an itinerant nature

You are only travelling to and from the mine site. There is nothing to suggest that your employment is inherently of an itinerant nature.

Transporting bulky equipment necessary for employment

There is no suggestion that you are required to carry 'bulky tools'. Even so, the cost of an airfare is an expense incurred to enable you to travel as a passenger. As a passenger, you are also entitled to carry a certain quantity of luggage with you, including work equipment. In these circumstances, the cost of an airfare will not be considered to have been incurred for the transporting of work equipment. 

In your case, you incurred motor vehicle and airfare expenses to travel to and from the site in order to attend work. These travel expenses are considered to have been incurred for travel between home and work. The expenses are a prerequisite to the earning of assessable income and are not incurred in producing that income. The costs you have incurred are as a consequence of living in one place and working in another and were incurred to enable you to commence, or return home after completing your income earning activities and they are considered private in nature and are not deductible.