Edited version of private ruling

Authorisation Number: 1011794981817

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Ruling

Subject: Work related expenses

Question and answer:

Are you entitled to a deduction for removal expenses incurred while moving interstate to take up on going employment?

No.

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

You held casual employment with your employer.

You have since relocated interstate to take up an ongoing position with your employer.

You incurred costs for a removalist to complete the move.

Relevant legislative provisions

Income tax Assessment Act 1997 Section 8-1

Reasons for decision

Summary

You are not entitled to a deduction for the costs of removal incurred while shifting interstate to take up an employment opportunity.

Detailed reasoning

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows for 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.

Taxation Ruling IT 2481 provides the Commissioner's view on the deductibility of relocation expenses. When a taxpayer transfers employment and incurs expenditure in moving from one place of residence to a new place of residence to take up the duties of the new position, that expenditure is not incurred, in the Commissioner's view, in gaining or producing assessable income. The taxpayer is not travelling while carrying out his or her work but is travelling to the location of his or her work and the travel to take up a new position is not deductible. This view is supported in various cases where the Commissioner's decision to disallow deductions for relocation was challenged in the Courts or at the Administrative Appeals Tribunal (AAT):

Amalgamated Zinc (De Bavay's) Ltd. v. FC of T (1935) 54 CLR 295;

Lunney v. FC of T (1958) 100 CLR 478; 7 AITR 166

FC of T v. Maddalena 71 ATC 4161

In summary, 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 commence earning income, but they are at a point too soon to be regarded as being incurred in the course of gaining or producing assessable income. These expenses are not deductible regardless of whether the employee is commencing new employment or transferring within existing employment.

To this end Taxation Ruling TR 95/13 considers the deductibility of work-related expenditure incurred by employee police officers. TR 95/13, at paragraph 167, states that a deduction is not allowable for expenses incurred when a police officer transfers from one district to another (whether voluntary or compulsorily) as they are private expenses. This principle applies to transfers in existing employment or to take up new employment.

Taxation Ruling TR 98/9 refers to self education and advises that

If the study of a subject of self-education objectively leads to, or is likely to lead to a taxpayer's income from his or her current income earning activities in the future, the self-education expenses are allowable as a deduction.

Examples of self-education expenses include such items as course or tuition fees for attending an educational institution as well as the cost of professional and trade journals. Expenses incurred in relocating to take up employment are not considered a self-education expense.

As your travel expenses are a necessary cost of rearranging your domestic circumstances prior to commencing the earning of income from a new position, the cost of relocating interstate is private or domestic in nature and not deductible under section 8-1 of the ITAA 1997.