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Edited version of private ruling
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Ruling
Subject: Electricity
Question
Are you entitled to a deduction for electricity, phone and water?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2011
The scheme commenced on
28 March 2011
Relevant facts
You are working on a site on a four days on, four days off rotation.
Your employer provides accommodation when working and you are responsible for electricity, phone and water costs.
You return home at the end of the rotation.
Your phone is used to keep in touch with your family.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for all losses and outgoings 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 relate to the earning of exempt income.
As a general rule, expenditure on accommodation (which includes electricity, phone and water) while working away from home is not allowed as a deduction. These costs are essentially 'living expenses' of a private or domestic nature. The fact that income cannot be earned unless certain expenses are necessarily incurred is not determinative of deductibility.
Where it has been established that a property used to accommodate a taxpayer amounts to a second residence, the Courts and the Administrative Appeals Tribunal have consistently held that the essential character of the expenses incurred is of a private or domestic nature unconnected with income-producing activities and, therefore, the expenses are not deductible. The reasoning in these cases is that a taxpayer's choice to establish a residence is not dictated by travel needs, but by considerations of a private or domestic nature. It follows that the required connection between second residence expenses and a taxpayer's income-producing activities is absent.
In FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 the Federal Court disallowed a forest worker's deduction for the cost of maintaining a caravan and other living expenses. The taxpayer incurred the expenses in providing temporary accommodation at the base camp because the taxpayer had chosen to reside at a place far from the worksite. These expenses were dictated not by work but by private considerations.
In your case, you have established a second residence at a location close to your workplace which is provided by your employer. Your electricity, phone and water expenses are considered to be of a private and domestic nature. Accordingly, a deduction for these expenses is not allowable.