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Ruling

Subject: Travel and accommodation expenses

Question 1

Are you entitled to a deduction for accommodation and travel expenses while working in City B?

Answer

No.

Question 2

Are you entitled to a deduction for the cost of taxis to and from the airport when you travel to and from City B?

Answer

No.

Question 3

Are you entitled to a deduction for accommodation and travel expenses while working In City A?

Answer

No.

This ruling applies for the following period

Year ending 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts and circumstances

Your permanent place of residence is in City A.

Your usual place of work is in City B.

For the next five months you will be on a fly in fly out arrangement to City B for approximately 50% of the time and the remainder of the time you will work for the same employer in their City A office.

After this period you will return to working in City B on a permanent basis.

You fly to City B on a Monday morning from your home in City A and return on Friday night.

Your employer will cover the cost of return flights from City B to City A.

During the weeks you are required to work in City A, each day you travel from your home to your employer's City A office and return.

You incur costs for accommodation and transport (car hire) in City B and City A.

You also incurred costs for taxis to and from the airport when you travelled to and from City B.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

Summary

The costs you incur for accommodation and travel while working in City B and for taxis to and from the airport are of a private nature and are incurred as a consequence of having your home in one place and working in another. Therefore these costs are not deductible.

Travel in relation to an alternative workplace is deductible. However, an alternative workplace cannot be a regular place of work. Your second workplace in City A is a regular place of employment for you and is therefore not an alternative workplace. For the period of five months you will have two regular places of work, one in City B and one in City A. No deduction is allowed for the travel to and from your City A workplace as this travel is private in nature. Your cost of accommodation in City A is also private in nature and not deductible.

Detailed reasoning

Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for all outgoings to the extent to which they are incurred in gaining or producing assessable income, or are necessarily incurred in carrying on a business for that purpose. However, a deduction is not allowable for outgoings that are of a capital, private or domestic nature.

Generally, accommodation expenses are private in nature and are not deductible. In Lunney v. FC of T (1958) 100 CLR 478 the Full High Court laid down the principle that for a deduction to be allowable it is not enough for the expenditure to be an essential prerequisite to the derivation of assessable income. In that case it was held that the costs incurred by a taxpayer in travelling to the place where they work are expenses incurred in order to enable them to earn income but are not expenses incurred in the course of earning that income.

The issue of expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location was considered in FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 (Toms' Case).

In Toms' Case, the taxpayer was a forest worker who during the working week lived in a caravan in a bush camp 108 kilometres from his family home in Grafton. He claimed it was too far to travel each day to his work in the forest, so that it was necessary to establish a caravan at the camp. He would return home on weekends. He claimed the costs of maintaining his caravan and other living expenses such as the cost of heating and lighting. The Federal Court considered that the caravan was rendered necessary as much by the taxpayer's choice of the place of his residence in Grafton as by his choice of employment in the forest, and its purpose was to enable him to retain his residence at Grafton although employed in the forest. It was held that the expenses incurred in relation to the temporary accommodation near the workplace while maintaining a family residence in another location were dictated not by his work but by private considerations, and therefore were not deductible.

In your case, you incurred expenses for accommodation and travel due to having your home in one city and your employment in another city. Whilst the expenses would not be incurred but for the distance of your work place from your family home, the expenses are a prerequisite to the earning of assessable income. That is, they are incurred in order to put you in a position to be able to earn income but are not incurred in the actual course of gaining or producing that income. Also, the expenses are considered to be private in nature as they are incurred due to your choice of where you live and where you work.

A deduction is therefore not allowable for your accommodation and travel expenses in City B or for the cost of taxis to and from the airport when you travelled to and from City B.

Second work location in City A

A deduction is generally allowable for the cost of travelling to and from an alternative workplace. For example, travel to and from a different centre for a workplace meeting or training is an allowable deduction. As highlighted in paragraph 34 of Miscellaneous Taxation Ruling MT 2027, an alternative destination is not a regular place of employment.

In your case, you will be working at your second location in City A during a five month period. This second work location is a regular place of employment and therefore cannot be regarded as an alternative place of work. As the second location will be a normal place of work for you, travelling to and from this workplace is not travelling on work, but rather travelling to and from work and is therefore regarded as a private expense. Therefore, the associated travel expenses are not an allowable deduction.

Your cost of accommodation in City A is also a private expense and therefore not deductible.

Your workplace in City B is also a regular place of employment and therefore any related travel expenses do not qualify for a deduction as travel to and from an alternative workplace.

In summary, for the period of five months you have two regular places of employment. Any travel to and from these locations is simply travel to and from work and therefore not deductible.