Edited version of private ruling

Authorisation Number: 1011794520427

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Ruling

Subject: Travel expenses

Question and answer

Is the cost of travel between you residence, being a property which you carry on a business of primary production, and your regional airport from where you are transported to a work site, deductible?

No

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts and circumstances

You live on a farm.

You operate the farm as a commercial partnership with your spouse.

You work as an employee in a different part of your state/territory.

You need to drive from your farm to a regional airport. From the airport your employer transports you by plane to the place you do your employment work.

You work X weeks on and return home for X weeks.

When you return home, you write reports based on your work.

The time you spend working at home is X day per cycle.

You transport a swag with you from your home to work location.

Relevant legislative provisions

Income Tax Assessment Act 1997

Section 8-1

Section 28-13

Reasons for decision

Where a taxpayer owns or leases a car, Division 28 of the Income Tax Assessment Act 1997 allows a deduction for car expenses worked out using one of four methods. You are entitled to a deduction, worked out using one of the methods, where you use a car in the course of producing your assessable income.

The fact that a business of primary production is being carried on at the residential property by the taxpayer does not automatically make deductible the expenses incurred in travelling between the property and the taxpayer's other business or employment. The Commissioner's view, as stated in Taxation Ruling IT 2199, is that the expenses incurred in travelling from home to work are not deductible as they are outgoings of a private nature. The High Court has stated in relation to 'home to work' travel: '...it may be said to be a necessary consequence of living in one place and working in another...' (per Williams, Kitto and Taylor JJ in Lunney v. FC of T; Hayley v. FC of T (1958) 100 CLR 478 at 501; (1958) 11 ATD 404 at 414).

The purpose of the trip will determine whether the related expenses will be an allowable deduction. Travel by a taxpayer from their residential property, where a primary production business is also carried on, to work, will generally maintain its character as non-deductible private expenditure, i.e., it is travel to work and not on work. This principle is supported by the Board of Review decisions in Case Q49 83 ATC 237; Case 113 26 CTBR (NS) 776 and Case F43 74 ATC 245; Case 61 19 CTBR (NS) 420.

Exceptions:

(a)  If the taxpayer is undertaking some significant primary production related activity such as carrying produce or stock to market, or carrying feed or veterinary supplies home, the costs of travelling on that particular trip may constitute an allowable deduction. This travel may be considered to be on work or business (see FC of T v. Vogt 75 ATC 4073, (1975) 5 ATR 274).

(b)  If there is sufficient nexus between the travel and the employment of the taxpayer. For example, travel costs may be deductible where the taxpayer's employment is itinerant (see FC of T v. Wiener 78 ATC 4006, (1978) 8 ATR 335) or where the home constitutes a base of their non-primary production business activities or employment (see Garrett v. FC of T 82 ATC 4060, (1982) 12 ATR 684). Refer also to Taxation Rulings IT 112; IT 113; IT 2543 and TR 95/34.

Primary production activities

In the High Court decision in Payne v FC of T 2001 ATC 4027 which concerned the deductibility of travel expenditure incurred in travelling between a private residence where a deer farming business was conducted and paid employment as a pilot. In rejecting the claim, the court said that the travel was neither part of the taxpayer's job as an employee, nor part of his business as a farmer. Instead, the expenditure related to the intervals between those two types of income-earning activity and therefore were not sufficiently connected with either. The expenditure on travel and accommodation incurred by the taxpayer was therefore not deductible.

You live on a farm, you work as a contract consultant. Your travel is incurred from your home to the airport. The travel to the airport is not in connection to the primary production activities performed on your farm.

Bulky Equipment

Where you are required to carry bulky tools or equipment, for example a heavy tool box, and there is nowhere to leave them at work, a deduction is available for the cost of travel between home and work The Commissioner expresses the view in IT 112 that he will allow deductions in this type of situation, provided:

· the equipment is of substantial value and of such bulk that it can only be conveniently transported by the use of a motor vehicle; and there are justifiable reasons for the taxpayer to keep the equipment at home, and

· the essential character of the expenditure itself is such that the expenditure is incurred as part of the operations by which the taxpayer earns his or her income; there is no other practicable way of getting his or her equipment to the places where he or she is to perform.

The transporting of a swag does not meet the characteristic of equipment which is required in the performance of your services of an employee.

Itinerant employment

You have indicated that you travel to and from the airport at least once a month. This journey is fixed and recurring in nature to the same destination. Your journey to the airport is not itinerant in nature.

Home as a base of employment

The question of whether you are carrying on a business at your residence is, in general, a question of fact. The nature of the activities conducted by contract consultants in providing professional services will not generally constitute the consultant's home as being a place of business (Taxation ruling TR 93/30). In cases where a contract consultant carried out administrative functions or even some contractual work at home, that use of the residence may, at best, constitute a home office (Taxation determination 94/71). Accordingly your travel expenses are not deductible.

Conclusion

Your travel expenses to the airport are not deductible because the journey is:

· not in connection to your primary production activities;

· considered to be travelling on consulting business as these activities commence after you arrive at your respective location;

· without a requirement for you to carry bulky equipment, your swag which you carry is not required in your employment work;

· not of an itinerant nature, and

· not from a location (your residence) which can be considered a place of business.