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Edited version of private ruling
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Ruling
Subject: Living away from home allowance
Question
Are you entitled to a deduction for travel expenses?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts
You work away from home for long periods.
Your employer pays you a living away from home allowance.
You have signed a living away from home declaration with your employer.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Fringe Benefits Tax Assessment Act 1986 Subsection 30(1)
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a loss or an outgoing is an allowable deduction if it is incurred in producing assessable income or in carrying on a business for the production of assessable income unless that loss or outgoing is capital or of a private or domestic nature or incurred in gaining exempt income.
To determine whether a deduction is allowable for travel expenses, it is first necessary to determine if the allowance you receive is for travel or a living away from home allowance (LAFHA).
Subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986) states that a LAFHA is a fringe benefit. Section 23L of the Income Tax Assessment Act 1936 directs that income which is subject to the provisions of the FBTAA 1986 is not assessable income. A LAFHA is not included in assessable income, whereas a travel allowance is generally subject to income tax and included in assessable income.
Miscellaneous Taxation Ruling MT 2030 provides guidance on the distinction between a LAFHA and a travel allowance.
A LAFHA is an allowance paid to an employee to compensate them for any additional expenses they incur, and disadvantages they suffer, because they are required to live away from their usual place of residence to do their work. Additional expenses do not include expenses the employee could claim as an income tax deduction.
A LAFHA is paid where the taxpayer has moved and taken up temporary residence away from his or her usual place of residence so as to be able to carry out employment at the new (but temporary) workplace. There is a change of job location and an actual change of residence to a place at or near the job location.
A travel allowance is an allowance paid to cover losses or outgoings incurred by a taxpayer for travel away from their ordinary residence that is undertaken in the course of their duties as an employee for accommodation or for food or drink, or for incidentals (subsection 900-30(3) of the ITAA 1997).
A travel allowance is paid because the taxpayer is travelling in the course of performing his or her job, for example, a travelling salesperson. The taxpayer does not change job locations but simply travels in order to carry out the requirements of the job. Travel allowances are often paid for comparatively short periods, exceptions being allowances paid where the employment is inherently itinerant in nature or where travelling is a regular incident of the occupation.
In your case, you work for long periods away from your usual home.
As you moved and took up temporary residence away from your usual place of residence so as to be able to carry out employment at the new workplace, the allowance you received is considered to be a LAFHA, and as such, is not included in your assessable income. This is supported by the fact that you signed a living away from home allowance.
No deductions for any expenses are allowable against this allowance as it is not assessable income. Also, any expenses incurred in living away from home are considered to be private in nature.