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Ruling

Subject: Deduction- accommodation expenses.

Question

Can you claim a deduction for accommodation expenses while working at a number of locations?

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 employed in the construction industry.

You work alternate weeks at locations A and B.

Your employer includes in your gross salary an additional amount to pay for accommodation expenses while working at these locations.

You reside at your main residence when not working at locations A and B.

Relevant legislative provision

Income Tax Assessment Act 1997 section 8-1.

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 to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature.

Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example unless one 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).

Generally accommodation expenses incurred by a person who lives away from home in order to carry out his or her own employment duties, at the place of employment, will not be deductible. Expenses of this nature are private, or incurred before or after the activity of earning assessable income. (Federal Commissioner of Taxation v. Cooper 91 ATC 4396; (1991) 21 ATR 1616; Federal Commissioner of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466).

However, an exception exists when these expenses are incurred by a taxpayer while travelling in the course of undertaking their employment duties or where a taxpayer is away from home overnight in connection with a work related activity. Examples of taxpayers required to travel in carrying out their duties of employment include travelling salespersons and interstate truck drivers.

The mere receipt of an allowance does not entitle an employee to a deduction. Similarly, the receipt of a payment to compensate for industry peculiarities does not entitle an employee to a deduction.

In your case, you are not considered to be travelling in the course of undertaking your employment duties. While you received an additional amount to compensate for the costs while working at locations A and B, the accommodation expenses you incur will enable you to stay in proximity to your work place and arrive at work on time. They are a prerequisite to the earning of assessable income and therefore are not expenses incurred in the course of gaining or producing that income.

Therefore, you are not entitled to a deduction for your accommodation expenses under section 8-1 of the ITAA 1997.