Edited version of private ruling

Authorisation Number: 1011849375647

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Ruling

Subject: Travel expenses

Question

Are you entitled to a deduction for the cost of your air travel?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2009

Year ended 30 June 2010

The scheme commenced on

1 July 2008

Relevant facts

In the 2008/2009 income year you were contracted to work for an overseas based company.

The contracts required you to work 30 days on and 30 days off.

The initial return flight was paid for by your employer.

For the first period of your contract you remained overseas.

You returned home during the second period of your contract, but you had to pay for this trip yourself.

You incurred expenses for this return airfare to Australia.

In the 2009/2010 income year you were contracted to another overseas company for two periods.

You returned home twice whilst contracted to the second employer, who reimbursed you for the first period but you were not reimbursed for the second period. You incurred expenses for this return airfare to Australia.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Summary

You are not entitled to a deduction for the cost of your air travel as it is not considered to be incurred in the course of earning your assessable income. That is, the expense is incurred in order for you to commence your employment duties and to return home after you have completed your employment duties; it is not incurred in the actual course of carrying out your employment duties. Also, the cost of your air travel is considered to be a private expense.

Detailed reasoning

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.

Certain expenditure such as travel expenses is often 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. This was established in the case Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166 (Lunney's Case). 

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. The cost of travel 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: Taxation Ruling TR 95/34.

In your case, you incurred expenses to travel between your home base overseas and Australia. These expenses are a prerequisite to the earning of assessable income and are not incurred in producing that income. In addition, these expenses are of a private nature and are incurred as a necessary consequence of living in one place and working in another (Lunney's Case). Therefore, they are not deductible