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Ruling

Subject: Living away from home expenses

Question

Are you entitled to a deduction for accommodation, meal and incidental expenses for living away from home?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

You have a permanent job working in Town A.

You live in City B.

You work on a rotating roster where you are expected to work several days straight and then have a break for a few days.

During these breaks you return to your home in City B.

Assumptions

None.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

Summary

The costs you incur for accommodation, meals and incidentals while working in Town A are of a private nature and are incurred as a consequence of having your home in one place and working in another. Therefore, they are not incurred in gaining or producing your assessable income and are 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, meals and incidentals due to having your home in one city and your employment in another town. 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, meal and incidental expenses.

Additional information

In your application you referred to Taxation Determination TD 2010/19.This TD applies to people who receive a travel allowance for travelling on work.

A travel allowance is paid where the employee is travelling in the course of performing his or her job. That is, the employee travels in the course of carrying out the duties of the job, for example, an interstate truck driver or a travelling salesperson.

A travel allowance is included in an employee's assessable income and is subject to tax. However, as the employee is travelling in the course of performing their employment duties, they are entitled to a deduction for the travel expenses they incur.

In your case you are not travelling on work, you are living away from home. That is, you do not travel while carrying out your duties; rather, you travel because you live in one city and your job is located in another town.

An employer may choose to pay an employee who lives away from home for work purposes an allowance as compensation for additional expenses incurred and other disadvantages suffered because they are required to live away from their usual place of residence due to the distance their workplace is situated from their home.

If such a living away from home allowance is received, it is not included in an employee's assessable income; rather it is subject to fringe benefits tax (FBT) with any FBT liability payable by the employer. However, any expenses incurred for living away from home (such as, accommodation and meal expenses) are not deductible for the employee. This is because they are private living expenses. Also, they are incurred in order to put the employee in a position to earn assessable income rather than being incurred in the actual course of earning assessable income.

As you are living away from home rather than travelling while carrying out work duties, TD 2010/19 is not applicable in your case.