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Ruling

Subject: Deduction-travel expenses

Question 1:

Are you entitled to claim a deduction for travel expenses incurred to and from the airport?

Answer: No.

Question 2:

Are you entitled to a deduction for meals and incidental expenses incurred while living in country A?

Answer: No

Question 3:

Are you entitled to claim a deduction for travel expenses incurred in relation to your family members?

Answer: No

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commenced on:

1 July 2010

Relevant facts

You agreed to work in country A at one of your employer's offices for a period of time.

Your employer paid your airfare to country A.

You paid travel expenses to and from the airport while in Australia and country A.

You were paid a salary from your employer in Australia.

Your employer provided you with accommodation in country A.

Your family members travelled to country A.

The purpose of your family members visit was to spend time with you.

Your family members undertook the following travel;

· from your relatives home to an airport in Australia

· from your accommodation in country A to the country A's Airport

· from country A to country B to renew a visa.

You paid for meals and incidental expenses while living in country A.

Your employer did not pay you a relocation allowance.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

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.

Living expenses

Generally living expenses are not deductible as it is considered that the essential character of such expenses is private or domestic in nature. General living expenses include expenses associated with food, clothing and shelter.

The principle that, generally, living expenses are not deductible expenses was reinforced by Latham CJ in Taxation, Federal Commissioner of v. Green (1950) 81 CLR 313 when he observed at page 317:

It is not enough in order to establish a right to a deduction to show that it was proper or reasonable for the taxpayer to make the expenditure which he claims as a deduction. For example, it is perfectly reasonable and proper for a taxpayer to incur living expenses and many expenses of a private or domestic nature, but such expenditure is expressly excluded from deductibility.... Thus, as has been stated in the course of argument, a taxpayer cannot deduct ordinary living expenses. It is true that such expenses are necessarily incurred if any income is to be earned or otherwise derived, but such expenses would be incurred whether income was earned or otherwise derived or not.

Expenditure on food, drink and incidentals is inherently private in nature and therefore generally not deductible (Federal Commissioner of Taxation v. Cooper 91 ATC 4396; (1991) 21 ATR 1616; Federal Commissioner of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466) unless the occasion of the outgoing gives the expenditure the essential character of a working expense, as in expenditure incurred while travelling away from home on work. For example, an office worker attends an interstate conference or a salesman travelling 'on the road'.

In your case, you are not considered to be travelling in the course of undertaking employment duties as country A is considered your regular place of work for the period of time you worked there.

You incurred expenses for food and incidentals for yourself and your family as a result of living in country A near your place of employment. Any food and incidental expenses you incurred to stay in country A are private expenditure and are not deductible under section 8-1 of the ITAA 1997.

Travel expenses to and from airport
Taxation Ruling IT 2566 states that where travel occurs to commence work in a new location, it is not travelling on duty that occurs but rather relocation prior to the commencement of duties. In your case, you left Australia and commenced a new position with your employer in country A. As such, you will not be able to claim a deduction for the travel expenses under section 8-1 of the ITAA 1997 for the trips to and from the airport.

Travel expenses incurred in relation to your spouse and family

In your case, your family travelled to country A to live with you during your period of employment in country A. You are not entitled to a deduction under section 8-1 of the ITAA 1997 for the cost of your family's airfares or any other travel expenses in relation to the trip to country A.