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Ruling

Subject: Deduction - travel expenses

Question:

Are you entitled to a deduction for car expenses between an education facility and your place of employment?

Answer: Yes.

This ruling applies for the following period:

Year ended 30 June 2010

The scheme commenced on:

1 July 2009

Relevant facts

Your employer provided on the job training.

You attended a training course over a number of months.

Your spouse owns a motor vehicle with an engine capacity of two litres which is registered in your spouse's name.

Your spouse used the motor vehicle to drop you off at your place of education and then picked you up after your studies to drop you off at your place of employment.

You have contributed to the purchase of your spouse's motor vehicle.

You are seeking to claim a deduction for the car expenses incurred in travelling between an education facility and your place of employment using the cents per kilometre method.

You paid car expenses for this travel.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1.
Income Tax Assessment Act 1997 section 28-25.

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows you to deduct from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income except where the loss or outgoing is capital, private or domestic in nature, or relates to the earning of exempt income.

Travel expenses between place of education and your place of employment
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 (Lunney v. Federal Commissioner of Taxation (1957-1958) 81 ATC 186 ALR 225; 1958). The cost of travel between home and work is generally incurred to put the employee in a position to perform duties of employment, rather than in the performance of those duties.

Taxation Ruling 98/9 deals with the deductibility of self-education expenses and is an updated version of Taxation Ruling TR 92/8 which was withdrawn in 1998. However, principles covered in paragraphs 11(d), 13(c), 43 and 44 of TR 92/8 relating to motor vehicle and travel expenses still apply.

Paragraph 13(c) of TR 92/8 states that motor vehicle expenses between a taxpayer's home and an educational institution where the taxpayer carried out income-earning activities at the institution are not an allowable deduction. If a taxpayer travels from their home to an educational institution and then to his or her place of work and returns home by the same route, only the costs of the journeys between the institution and the place of work are allowable.

In your case, your studies were undertaken at an education facility and you then travelled to your place of employment. Accordingly a deduction is allowable for the cost of your car expenses for this travel under section 8-1 of the ITAA 1997.

Work related car expenses
Pursuant to Division 28 of the ITAA 1997, there are four methods available to claim car expenses when a car is used for work related purposes:

· the 'cents per kilometre' method

· the '12% of original value' method

· the 'one-third of actual expenses' method

· the 'log book' method.

Although each method has different substantiation requirements, all methods require you to own or lease the car used. You are able to choose the method that best suits your situation and needs.

Use of your spouse's car
Normally a car will be registered in the name of its owner. However, a taxpayer may be considered to be the owner or lessee of a car where a family or private arrangement makes them the owner or lessee even though they are not the registered owner.

A taxpayer can prove ownership of the car by demonstrating their financial contributions to any of the following:

· the initial purchase of the car

· lease payments

· hire purchase agreements; or

· loan payments.

A taxpayer may not be considered to own or lease the car if they do not contribute to the payment of one of the above, even though the taxpayer may pay for other expenses such as registration, insurance, maintenance or other running costs.

In your case, you have contributed to the initial purchase of your spouse's motor vehicle which is registered in their name. As you contributed financially to the initial purchase of the car, you are considered to own the motor vehicle and accordingly, you can claim your motor vehicle expenses using the cents per kilometre method under section 28-25 of the ITAA 1997.