Edited version of your private ruling

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Ruling

Subject: Accommodation and meal expenses

Question

Are you entitled to a deduction for accommodation and meal expenses incurred while working away from home?

Answer

No.

This ruling applies for the following periods

Year ended 30 June 2009

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commenced on

1 July 2008

Relevant facts

You are employed in a remote area and work on a 7 day roster.

The only accommodation available is a campsite, which is temporary accommodation.

You reside at this campsite for a 7 day roster, before returning home for rostered days off.

Your employer has a condition of your employment that you reside at this campsite and deducts an amount per week from your pay.

Your permanent residence is in Town A.

The closest area that has available permanent residences is Town B, which is approximately 30 kms away, where the cost of living is considered much higher than your current residence.

You do not receive a living away from home or travel allowance from your employer.

Your employer has now offered a salary sacrifice arrangement for these expenses.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Summary

The costs you incur for accommodation and meals while working near Town B 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 and meals due to having your home in one city and your employment elsewhere. 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 meal expenses.

Your contentions

In your private ruling application, you referred to the case, Roads and Traffic Authority of NSW v. FC of T (1993) 43 FCR 223. That case involved road construction and repair crews and expenses relating to camping at their work sites.

It is considered that your circumstances can be distinguished from those in that case. The road construction and repair crews did not have a single work location; their work sites constantly changed. They were considered to be travelling on work and therefore their travel expenses were deductible. In your case you have one work location. You have a regular place of work where you work on a roster basis. You are not considered to be travelling on work and therefore your accommodation and meal expenses are not deductible.