Edited version of private ruling

Authorisation Number: 1011852122030

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Ruling

Subject: deductibility of car expenses

Question and answer:

Are you entitled to a deduction for car expenses incurred in travelling between your home and your place of employment?

Yes.

This ruling applies for the following periods;

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commenced on

1 July 2010

Relevant facts

You work at a remote site.

You work on a cycle whereby you work for a number of days then you have the same number of days off.

This cycle requires you to travel from your home to the site, where you stay for a number of days after which you return home.

You are required to travel a number of hours from your home to your work site.

Your travel to and from work is in excess of 5,000 km a year.

You use your private motor vehicle.

There is no routine air transport available to transport you to your work site.

When at work, your duties are performed at the one site.

When you are on leave, you are required to be on call to deal with any incidents that may occur at the site. You manage your on-call status and these incidental duties by contacting the site by phone or fax and on the odd occasion you have been required to return to the site. You have stated your home is not a base of operations.

You carry the tools, clothes and other items in your car between your home and your place of employment.

The tools you carry range from basic hand tools to instrumentation tools and are held in a tool box with dimensions greater than, and a weight similar amount to, the toolbox in Crestani's case.

Your work provides you with a lock-up office that would enable you to store your equipment, however you elect to take your tools home after every work cycle as they are required for a business that you operate.

The business that you operate involves the automation of production lines.

You operate the business during the days that you are on leave.

You perform the following duties as a consequence of running your business:

· sales;

· design;

· installation;

· commissioning; and

· service

You require the use of your tools to perform some of these duties.

Your family remains in your home town due to schooling and for employment purposes.

You do not receive a travel allowance from your employer.

You have recorded your travel in a diary and have sample readings of kilometres travelled.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for Decision
Car expenses

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.

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 or place to perform duties of employment, rather than in the performance of those duties.

This view is expressed in Taxation Ruling IT 112: Deductibility of travelling expenses between residence and place of employment or business, which discusses various court decisions and affirms the view that home to work travel, in most cases, is a private expense.

The essentially private character of travel between home and work is not affected by factors such as the mode of transport, the availability of transport, the lack of suitable public transport, the erratic times of employment, the time of travel, the distance of travel or the necessity of travel.

Aspects of home to work travel which makes its cost an allowable deduction

As stated previously, home to work travel is generally a private expense. However, the Commissioner accepts that expenses incurred by employees in travelling to and from work are deductible in certain circumstances. Most relevant to you is the circumstance whereby an employee is required to carry bulky equipment between home and work.

Taxation Ruling TR 95/34: Employee carrying out itinerant work - deductions, allowances and reimbursements for travel expenses, provides the Commissioners view on the deductibility of travel expenses where an employee is required to carry bulky equipment.

Paragraphs 63 and 64 of Taxation Ruling TR 95/34 provides that a deduction may be allowed for travel between home and place of work where;

· the cost can be attributed to the transportation of bulky equipment rather than to private travel between home and work,

· it is essential to transport the equipment to and from work and it is not done as a matter of convenience or personal choice,

· there are no secure facilities available for storage of the equipment at the work place.

The question of what constitutes bulky equipment must be considered according to the individual circumstances in each case.  Equipment that is of a private nature cannot be taken into account when considering whether a taxpayer is transporting 'bulky equipment'.

In your case, the clothes and other items (other than the toolbox) carried in your car to and from your workplace are considered items of a private or domestic nature that are not directly related to the earning of your assessable income.

In the court case, Crestani v. FC of T 98 ATC 2219; (1998) 40 ATR 1037 (Crestani's Case), a tool box which measured 57 x 28 x 25 centimetres and weighed 27 kilograms was considered as 'bulky', in the sense of 'cumbersome', and the transport cost was 'attributable' to the transportation of such bulky equipment rather than private travel between home and work. The employer did not provide a secure storage area for the tool box and the use of public transport was not a viable option.

In regards to your toolbox, you are required to carry tools that are directly related to the earning of your assessable income at the site as well as your business. The toolbox that you carry is of a similar weight and larger size to that in Crestani's Case. Accordingly, your toolbox is considered to be sufficiently large and heavy so as to be termed 'bulky equipment'. As the tools are required to perform duties at both the site and in the running of your business it is essential to transport the equipment to and from work. This is so regardless of the fact that your employer provides secure on site storage for the tools while you are away from the site.

Accordingly, the travel between your home and work is considered to be undertaken to transport 'bulky equipment', and therefore is deductible under section 8-1 of ITAA 1997.