Edited version of your private ruling

Authorisation Number: 1011955842948

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: Relocation and removalist expenses

Question:

Are you entitled to a deduction for relocation and removalist costs?

Answer

No.

Relevant facts

You resigned from your employment and relocated to another city. Your employer made payments to you on the understanding that you would then pay for your own house selling costs, removal and relocation expenses.

You sold your place of residence and before you relocated you rented premises for which you claimed an amount from your employer.

You commenced applications as soon as possible after ceasing employment.

It was your intention when relocating to take up work in the new location.

Reasons for decision

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.

Taxation Ruling IT 2614 examines the deductibility of relocation and removalist expenses. The ruling states that these expenses are not allowable deductions as they are private or domestic in nature. This is so, regardless of the reason why the taxpayer is relocating or whether an allowance has been paid.

IT 2614 states:

The fact that an allowance paid to an employee is expended by that employee for the purpose for which it was paid does not of itself impress an outgoing with any greater degree of deductibility than that which it would have had if no allowance been paid. It is the nature or character of the outgoing itself, without regard to the nature or character of any allowance that might be received, which determines whether it is an outgoing that is deductible.

This view is supported by the decision of the Taxation Board of Review in Case R22 84 ATC 212, (1984) 27 CTBR (NS) Case 76. In that case the taxpayer received an allowance from his employer for using his car to travel to work. The allowance was assessable income as it was an amount received in relation to his employment. The taxpayer claimed a deduction for his car expenses in travelling to work as he argued that he was required to incur these expenses in order to receive the allowance. The Board rejected this argument. It stated that the receipt of a related allowance does not make an expense deductible; rather it is the nature of the expense that determines its deductibility. Expenses incurred in travelling to work are expenses of a private nature and therefore the Board held that the expenses were not deductible.

In your case, you received payments from your employer in relation to relocation and removalist costs. As discussed above, the fact that you received these payments does not make your costs deductible. These costs are intrinsically private in nature and therefore are not deductible.

Also, these costs are not considered to be incurred in earning income from your new employment. They were incurred in order to put you in a position to earn income rather than being incurred in the course of carrying out the duties of your new employment. Therefore, your relocation and removalist costs are not deductible against the income from your new employment.