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Edited version of private ruling
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Ruling
Subject: removal and storage expenses
Are you entitled to a deduction for your removal and storage expenses?
No.
This ruling applies for the following period:
Year ended 30 June 2010
The scheme commences on:
1 July 2009
Relevant facts and circumstances
You lived interstate and accepted permanent employment in another city.
You incurred expenses for removal of your personal belongings as your employer did not offer to pay the costs.
You incurred expenses for storage of your belongings for a period of time.
Your employment contract does cover reimbursement of removal costs.
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent that they are incurred in gaining or producing assessable income, except where the outgoings are capital, private or domestic in nature, or relate to the earning of exempt income.
Travel, relocation and removal expenses of an employee to obtain a new position are generally not allowable deductions under section 8-1 of the ITAA 1997 because the expenses are not incurred in gaining or producing assessable income.
Taxation Ruling IT 2614 examines the deductibility of relocation expenses. The ruling states that expenses incurred in relocating to take up an appointment with a new or existing employer are not allowable deductions as they are private or domestic in nature. This is so, regardless of whether an allowance has been paid, or if the relocation was involuntary.
In general, all relocation expenses are a prerequisite to the earning of income in the same manner as are travel expenses to and from work. Such expenses put the taxpayer in a position where they can earn income, but they are at a point too soon to be regarded as being incurred in the course of gaining or producing assessable income (FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541). These expenses are not deductible regardless of whether the employee is commencing a new employment or transferring within an existing employment.
Taxation Ruling IT 2481 also discusses this expense. At paragraph 9 the ruling states the expenditure is not incurred in gaining or producing income and is not deductible as the taxpayer is not travelling on work, but to work.
In your case, you incurred relocation expenses to take up your new employment as your employer did not offer to pay. The expenses incurred are private or domestic in nature and put you in a position to earn assessable income, rather than in the earning of that income.
Therefore, you are not entitled to a deduction for removal and storage expenses under section 8-1 of the ITAA 1997.