Edited version of your private ruling

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Ruling

Subject: site allowance and expenses

Question 1

Is the site allowance assessable income?

Answer

Yes.

Question 2

Are you entitled to a deduction for site or travel expenses?
Answer

No.

This ruling applies for the following period

Year ended 30 June 2009

Year ended 30 June 2010
The scheme commenced on

1 July 2008

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are:

· the application for private ruling

· additional information

· employment agreements.

You were employed interstate.

Your work roster was a 28 day work cycle of 10 hours per day.

You are required to be on site for various periods of time.

You were required to travel to various sites for your employment

You received a daily site allowance during the work cycle of 28 days. The site allowance is not paid when you are on annual leave.

The site allowance provides you compensation for being absent from your usual place of residence and is included in your gross income on your annual payment summary.

You were paid the base salary during the R&R breaks of 9 days.

Your employer reimburses you for all reasonable expenses incurred in the performance of your duties including all company authorised travel and accommodation expenses. Travel is booked and paid for by the company in relation to any site requirements and will be covered from door to door.

You were later employed by another company.

This company also pays a site allowance. The site allowance relates to the hours of work, general site conditions and location.

Under the employment conditions with this company you receive an earnings guarantee and the terms and conditions of an award do not apply to your employment.

Your employer pays for travel costs from your residence to site for work purposes.

Your employer provides and pays for accommodation on site whilst away from home.

Your shifts and work locations are not regular.

Food is supplied on site.

Your employment agreements or payslips from both companies do not show that any other allowances were paid to you.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 15-2.

Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Division 900

Reasons for decision

Assessable income

Section 15-2 of the Income Tax Assessment Act 1997 (ITAA 1997) states that your assessable income includes the value to you of all allowances, gratuities, compensation, benefits, bonuses and premiums provided to you in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by you.

Your site allowance forms part of your assessable income and should be included in your tax returns.

Allowable deductions

Section 8-1 of the ITAA 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, or relate to the earning of exempt income.

A number of significant court decisions have determined that for an expense to be an allowable deduction:

· it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense (Lunney v. FC of T; (1958) 100 CLR 478 (Lunneys case))

· there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income (Ronpibon Tin NL v. FC of T, (1949) 78 CLR 47)

· it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income (Charles Moore Co (WA) Pty Ltd v. FC of T, (1956) 95 CLR 344; FC of T v. Hatchett, 71 ATC 4184).

A deduction is only allowable if an expense:

· is actually incurred

· meets the deductibility tests

· satisfies the substantiation rules.

A deduction is not allowable if an employee incurs expenditure of a private or domestic nature in order to cope with the working conditions that exist.

The receipt of a site allowance, or an allowance to compensate for inconvenience, isolation or discomfort suffered during the course of employment does not entitle the employee to an offsetting deduction (Taxation Determination TD 93/49).

Example 2 in TD 93/49 is relevant and states:

A mining company employee camps out to undertake land surveys and is paid a site allowance to compensate for the inconvenience, isolation and discomfort of remote job sites. The employer provides all items necessary for the employee to camp out.

The allowance is included in the employee's assessable income. As the employee has not incurred any work related expenditure in relation to this allowance, no deduction is allowable.

Also, the fact that an employee may incur an expense at the direction of the employer does not mean that the amount is deductible.

In your case, your employers have paid for your travel and accommodation expenses and reimburse you for any work related expenses. There is no evidence to show that your have incurred any relevant work related expenses in relation to your site allowance or employment position. Therefore no deduction is allowed.

The expenses incurred in relation to your site allowance are not regarded as work related expenses and are not sufficiently related to the actual earning of your assessable income. Furthermore, the associated expenses on the daily necessities of life, such as accommodation, food and drink are private in nature. Therefore no deduction is allowable.

As you do not receive a travel allowance or overtime meal allowance, and the accommodation and other travel expense are paid by your employer, you are not entitled to any deductions.

Division 900 of the ITAA 1997 outlines the substantiation rules for work expenses. As you have not incurred any deductible site, travel, accommodation or meal expenses, the substantiation provisions are not relevant. Therefore any substantiation exceptions for domestic travel allowance expenses contained in these provisions have no application in your circumstances. It follows that Taxation Ruling TR 2004/6 and Taxation Determinations TD 2008/18 and TD 2009/15 have no application in your case.