Edited version of private ruling

Authorisation Number: 1011833271356

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Ruling

Subject: Work related expenses

Questions :

1. Are you entitled to a deduction for travel between home and work when transporting your equipment for personal and unpaid activities?

Answer: No.

2. Are you entitled to a deduction for travel between home and work when your equipment is provided by your employer?

Answer: No.

3. Are you entitled to a deduction for travel between home and work when you are required to carry your own bulky equipment, and the equipment is not supplied by your employer?

Answer: Yes.

4. Are you entitled to a deduction for travel between home and work when you are required to carry smaller items of equipment and the equipment is not supplied by your employer?

Answer: No.

5. Are you entitled to a deduction for the purchase of cold weather gear and boots?

Answer: No.

6. Are you entitled to a deduction for the purchase of a hat, sunglasses and protective sunshirt for use in your outdoor employment?

Answer: Yes.

7. Are you entitled to a deduction for decline in value (depreciation) of your equipment that relates to your income producing use?

Answer: Yes.

8. Are you entitled to a deduction for the work related portion of your equipment's insurance costs?

Answer: Yes.

9. Are you entitled to a deduction for the purchase of food?

Answer: No.

10. Are you entitled to a deduction for the cost of work related calls made from your mobile phone?

Answer: Yes.

11. Are you entitled to a deduction for the purchase of industry based DVDs and magazines used for income producing purposes?

Answer: Yes.

Relevant facts

You are employed casually and carry out outdoor activities.

You have several employers who provide differing levels of equipment.

A condition of your employment is that you are required to maintain a certificate. You obtained the initial qualification in 200X and further qualifications since that time. Your qualification needs to be renewed every few years.

To maintain your certificate and thus your employment, you must perform and record a certain amount of practical activities. You are not always paid for the activities you participate in to formally maintain your qualifications. You keep a log book in which you record the points for each activity in order to maintain your qualifications.

You are a member of a relevant club. Through this club you conduct your practical activities relating to maintaining your certificate. You provide your own equipment when doing these activities.

You purchased cold weather gear for protection in situations when tasks for the day may be changed with minimal notice, and you take your clothing to each worksite for the same reason.

A part of your work requires you to camp out. During these trips away you supply your own equipment and food.

You carry various equipment and clothing.

Due to an injury, you purchased your own item of equipment which you take with you.

You are required to carry your equipment between your home and work when undertaking unpaid work. There is some secure storage provided, and you choose not to use this storage as you require this equipment at changing locations.

You are only required to take your own bulky equipment for approximately 5% of your employment.

You have some equipment provided by employers, but due to varying standards of other equipment, you prefer to use your own equipment as you maintain it to a high standard.

You travel to different locations for your paid employment.

Your equipment needs to be transported on a job by job basis.

You incur expenses relating to using your mobile phone for work purposes.

You incur expenses relating to purchasing instructional DVDs and magazines for use in your employment.

You incur insurance expenses relating to your equipment.

Reasons for decision

Travel between home and work

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, or relate to the earning of exempt income.

Division 28 of the ITAA 1997 allows a deduction for car expenses where the car travel is in the course of producing your assessable income or travel between workplaces.

A deduction is generally not allowable for the cost of travel by an employee between home and their normal workplace as it is considered to be a private expense (Lunney v. Federal Commissioner of Taxation (1958) 100 CLR 478; 11 ATD 404 (Lunney's Case) Taxation Ruling 112).

In Lunney's case, it was held that fares paid by taxpayers to enable them to go day by day to their regular place of employment or business and back to their home are not deductible against the assessable income earned by them from their employment or business. In a joint judgment, Williams, Kitto, and Taylor JJ stated (CLR at 498 - 499; ATD at 412 - 413)):

It is, of course, beyond question that unless an employee attends at his place of employment he will not derive assessable income and, in one sense, he makes the journey to his place of employment in order that he may earn his income. But to say that expenditure on fares is a prerequisite to the earning of a taxpayer's income is not to say that such expenditure is incurred in or in the course of gaining or producing his income.

The cost of travelling between home and work is generally incurred to put the employee in a position to perform duties of employment, rather than in the performance of those duties. This principle is not altered by the performance of incidental tasks en route (paragraph 34 of Miscellaneous Taxation Ruling MT 2027) or use of a car because using public transport is impracticable.

Expenses of travelling between home and a place of work are generally not deductible. However, a deduction may be allowed in certain exceptional circumstances, for example, where the taxpayer's job is itinerant, or where the taxpayer is required to carry bulky equipment to work.

Employment duties of an itinerant nature

A deduction is allowable for the cost of travel between home and work for an employee who is engaged in itinerant work.

Taxation Ruling TR 95/34 provides guidelines for establishing whether an employee is carrying out itinerant work. The ruling states that the following characteristics are indicators of itinerancy:

· travel is a fundamental part of the employees work;

· the existence of a 'web' of workplaces in the employees regular employment, that is, the employee has no fixed place of work;

· the employee continually travels from one work site to another. An employee must regularly work at more than one work site before returning to his or her usual place of residence.

To put you in a position to carry out your duties, you are required to travel from your home to the workplace in your own vehicle. Your duties are expected to commence when you reach the workplace where you start your work. Although it is accepted that you may travel to different locations for work, there is no evidence to show that this is a regular or major function of your work activities. Furthermore you do not regularly work at more than one site before returning home.

Accordingly, we do not consider the nature of your duties to be itinerant as travel in your own vehicle is not a fundamental part of your duties for which you are paid. Your travel to different work sites based on work requirements does not constitute a 'web of workplaces'.

Hence, although there can be some travelling to different locations for work, this factor is insufficient to treat your work as itinerant.

Bulky equipment

A deduction may be allowable if the transport costs can be attributed to the transportation of bulky equipment necessary for employment rather than to private travel between home and work (Federal Commissioner of Taxation v. Vogt [1975] 1 NSWLR 194; 5 ATR 274; 75 ATC 4073) (Vogt's case). If the equipment is transported to and from work as a matter of convenience or personal choice, it is considered that the transport costs are private and no deduction is allowable. A deduction is also not allowable if a secure area for the storage of the equipment is provided at the work place.

The question of what constitutes 'bulky equipment' must be considered according to the individual circumstances in each case.

The leading case on the transportation of bulky equipment is Vogt's case. In this case the taxpayer was allowed the cost of using his car to transport bulky musical instruments to clubs where he performed. Justice Waddell held at page 4078 that:

· the essential character of the expenditure was such that it should be regarded as having been incurred in gaining or producing the assessable income.

In your case, you transport clothing, food and equipment.

It is considered that food and clothing are private in nature and not bulky equipment necessary for employment. Although your equipment is regarded as work related equipment, they are not considered to be bulky. One item only is regarded as bulky.

On the occasions where you are undertaking paid employment and the employer does not provide the relevant equipment, it is considered that the transport of this bulky item between home and work is allowable.

However where your employer provides some equipment, the transport of your food, clothing and other equipment are not considered to be bulky and therefore the associated travel is regarded as private in nature and not allowable as a work related deduction.

The transport of your equipment for personal and unpaid activities is not considered to be sufficiently connected to the earning of your assessable income. Therefore no deduction is allowable for this travel.

Food

The cost of food may be allowable when away from home overnight for work related purposes. Travel to various campsites is regarded as your normal place of work and food costs incurred while away are private in nature. Furthermore it is mainly the unpaid activities where you incur your food expenses. It is the Commissioner's view that the cost of food does not have sufficient connection with the income-earning activity.

Therefore, as food and drink are private in nature, the transport of food and drink to be consumed while at work, regardless of the fact of availability or unavailability in being able to purchase or the requirement of the employer to bring meals to work, does not alter the situation that it is also private in nature. Therefore, no deduction is allowable for your food and drink.

Decline in value

Items of equipment are generally regarded as capital items and not deductible under section 8-1 of the ITAA 1997.

Section 40-25 of the ITAA 1997 allows you to deduct from your assessable income an amount equal to the decline in value (depreciation) of a depreciating asset to the extent that it is used to produce assessable income. 

Subsection 40-25(2) of the ITAA 1997 states that you must reduce your deduction by the part of the asset's decline in value that is attributable to your use of the asset, or your having it "installed ready for use, for a purpose other than a taxable purpose".

In your case, some of your equipment are depreciating assets for tax purposes as they have a limited effective life and can be expected to decline in value over the time they are used. As you use your equipment for both income producing and other purposes, any deduction for your decline in value needs to be apportioned accordingly.

No information has been provided to show your radio or camera have been used for a taxable purpose, therefore no deduction is allowed for these items.

The Tax Office publication Guide to Depreciating Assets can be located on our website www.ato.gov.au and will provide further information on calculating the decline in value deduction of your assets.

Purchase of cold weather gear

You have purchased cold weather gear for protection.

Taxation Ruling TR 97/12 considers the deductibility of work related clothing, uniform and footwear expenses.

The ruling states that generally the cost of buying clothing will be regarded as an expense of a private nature. Clothing is necessary for protection of the body from the elements and to meet social norms of modesty, fashion or similar conditions.

The circumstances where expenditure for clothing is considered to be deductible are where the clothing is:

· occupation specific clothing

· a compulsory uniform/wardrobe

· a non-compulsory uniform/wardrobe

· protective clothing and footwear

Expenditure on conventional clothing does not usually have a sufficient connection to income earning activities. The fact that an employer requires or expects an employee to wear particular conventional clothing does not make the cost of the clothing deductible.

Taxation Ruling TR 2003/16 provides guidelines on the deductibility of protective items, including footwear used for protection against injury.

Expenditure on a protective item will have a sufficient connection with the earning of your assessable income where:

· you are exposed to the risk of illness or injury in the course of carrying out your income earning activities;

· the risk is not remote or negligible it would be a real risk to anyone who worked where you are required to work;

· the protective clothing is of a kind that provides protection from that risk and would reasonably be expected to be used in the circumstances; and

· you use the item in the course of carrying out your income earning activities.

Sunhats, sunglasses and protective sunshirts used for protection from the sun while carrying out income earning activities outdoors are an allowable deduction. Therefore your sunhat, sunglasses and protective sunshirt are allowable deductions.

It is not considered that your clothes have the essential character of an outgoing incurred in gaining assessable income. It is considered the clothing you wear will support your personal comfort but not significantly protect you from the risk of illness or injury. The cold weather gear, conventional clothes and boots are not occupation specific clothing, not a compulsory uniform, not a non-compulsory uniform and are not considered to be protective. Therefore, a deduction is not allowable.

Insurance

Insurance on an income producing asset is deductible under section 8-1 of the ITAA 1997 where the necessary connection with the earning of assessable income exists. Where the item is used for income producing purposes and other purposes, only a portion of the cost is allowable.

The insurance of your item of equipment will be deductible to the extent of the work related portion of its usage.

Phone

Where you use your phone in the course of undertaking your income producing activities, you are generally allowed a deduction for your work related call costs.

In your case, when you incur expenses relating to calls made on your mobile phone for work related purposes you are entitled to a deduction for these expenses.

However you are not entitled to a deduction for any calls made in relation to your private and non paid activities.

Magazine and DVDs

Generally, you are allowed a deduction for the cost of buying or subscribing to journals, periodicals and magazines that have a content specifically related to your work and are not general in nature.

In Case R70 84 ATC 493; 27 CTBR (NS) Case 124 , in which an accountant employed with the Public Service was allowed a deduction for the cost of publications produced by a business and law publisher. The nexus between the expense and the accountant's occupation was established, as the publications contained current technical information that related to her day-to-day work. She was, however, not allowed a deduction for the cost of daily newspapers and periodicals.

In your situation, you purchase instructional DVDs which you use during your instruction sessions and purchase industry specific magazines to maintain your currency with the technical aspects relating to your incoming earning activities. It is accepted that these items are used in earning your assessable income and you are entitled to a deduction.

Self education

The costs of maintaining and re-registering your certificate may be considered a self education expense. Self education expenses may be an allowable deduction under section 8-1 of the ITAA 1997 where the relevant connection to your income earning activities exist.

A number of significant court decisions have determined that, for an expense to satisfy the tests in section 8-1 of the ITAA 1997:

· it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense (Lunney v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 7 AITR 166; (1958) 11 ATD 404);

· there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income (Ronpibon Tin v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 4 AITR 236; (1949) 8 ATD 431 (Ronpibon's Case)); and

· it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income (Charles Moore & Co (WA) Pty Ltd v. Federal Commissioner of Taxation (1956) 95 CLR 344; (1956) 11 ATD 147; (1956) 6 AITR 379; FC of T v. Cooper (1991) 29 FCR 177; 91 ATC 4396; (1991) 21 ATR 1616 (Cooper's case).

For a deduction to be allowable a sufficient nexus must exist between the expenditure and the gaining or producing of assessable income.

In Cooper's case, Lockhart J stated at page 1622:

The question whether additional expenditure of the taxpayer is deductible under s 51(1) cannot be answered simply by a process of reasoning that, because expenditure of this type is a prerequisite to the earning of the taxpayer's assessable income (in the sense that it is necessary if assessable income is to be derived), it must be incidental and relevant to the derivation of income. It does not follow that such expenditure is incurred in or in the course of gaining or producing the assessable income.

(Note: Section 51(1) of the Income Tax Assessment Act 1936 is the equivalent of section 8-1 of the ITAA 1997.)

Taxation Ruling TR 98/9 sets out the Commissioner's view on self- education expenses. Self education expenses are deductible under section 8-1 of the ITAA 1997 if:

· they have a relevant connection to your current income-earning activities,

· your income earning activities are based on the exercise of a skill or some specific knowledge and the subject of self education enables you to maintain or improve that skill or knowledge, or

· the self education objectively leads to, or is likely to lead to, an increase in your income from your current income-earning activities.

Deductions are not allowed if the subject of the self-education is too general. A necessary connection between the self-education expenses and your income-earning activity will not exist.

The Administrative Appeals Tribunal (AAT) has decided cases involving school teachers seeking deductions for the cost of overseas travel. The AAT concluded that although a taxpayer may have been a 'better' teacher because of the travel, this fell short of the sufficient connection required between the travel and their income earning activities. The taxpayers were fortunate in finding personal and recreational satisfaction in their field of endeavour. The trips were recreational in character and not deductible.

Although you are not a school teacher, the above principle is relevant in your situation. You carry out personal and unpaid activities to help maintain your certificate. Although your certificate is required for you to earn assessable income, it can not be said that your expenses are incurred in the course of gaining or producing your assessable income. The requirements to maintain your certificate is a requirement of the relevant association and not your employers. As outlined above, this extra experience may help you become a better employee however there is insufficient connection between your expenses and your casual income earning activities. You are fortunate to have personal and recreational satisfaction in your field of endeavour. The personal and unpaid activities and other unpaid club activities are largely recreational and private in character and the associated expenses are not an allowable deduction. Although the knowledge gained may have some benefit for your income earning activities it is considered this benefit to be too remote for the expenses to be deductible. The associated expenses are not seen as being incidental and relevant to your deriving income. The nexus between the use of your equipment on such occasions and your employment duties is too remote to allow any associated deductions. Therefore, the cost of maintaining your certificate and participating in personal and unpaid activities are not deductible expenses under section 8-1 of the ITAA 1997.