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Ruling

Subject: Work related expenses - travel and accommodation

Questions

Are you entitled to claim a deduction for expenses incurred for accommodation at Town B, travel expenses between your home and your Town B accommodation and travel expenses between your Town B accommodation and your workplace?

Answer: No

Are you entitled to claim a deduction for expenses you incur in travelling directly between two places of work?

Answer: Yes

This ruling applies for the following period

Year ended 30 June 2013

Year ended 30 June 2012

Year ended 30 June 2011

Year ended 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts and circumstances

You and your family reside in Town A.

You are a casual employee recruited to work at a workplace outside of Town A.

You work mainly at the one workplace, however, you sometimes work at several different worksites of your employer, including at a factory work shop in Town A.

You have secured accommodation at a caravan park near your main workplace, so that you do not have to travel back to your home in Town A each day.

At the beginning of each working week, you travel from your family home in Town A to your accommodation near your workplace, and return to Town A on Friday night.

Weekdays, you travel from your accommodation to your work site and return.

About once a month, you travel from your accommodation to your main work site and then to another work site of your employer and return, or vice versa.

You are claiming accommodation expenses for your stay during the week (including rent and utilities).

You are claiming motor vehicle expenses for travel between Town A and your accommodation and from your accommodation to your work site.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Summary

The costs you have incurred for travel expenses between Town A and Town B and, between Town B and your workplace, are as a consequence of living in one place and working in another. The expenses were incurred to enable you to commence, or return home after completing, your income earning activities and were not incurred in the production of your assessable income. As such, the expenses are considered private or domestic in nature and are not deductible.

Similarly, the accommodation costs were incurred to enable you to stay in close proximity to your workplace in Town B and not in the production of your assessable income. These expenses are also considered to be private or domestic in nature and are not deductible.

However, the costs you incurred for travel expenses on the days you were required to travel directly between two workplaces in the same day are deductible.

Detailed reasoning

Travel Expenses

Section 8-1 of the Income Tax Assessment Act 1997 (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.

In your case, you have incurred costs for travel between your home in Town A and your workplace in Town B, in addition, you incurred costs for travel between your accommodation in Town B and your workplace. These expenses are essentially incurred for home to work travel regardless of the distance travelled.

Generally, a deduction is not allowable for the cost of travel between home and work as this travel is considered to be of a private or domestic nature. These expenses are incurred as a consequence of living in one place and working in another.

In Lunney v. FC of T (1958) 100 CLR 478 (Lunney's Case) 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.

In your case, the costs you have incurred for travel expenses between your home in Town A and your accommodation in Town B and, between your accommodation in Town B and your workplace are considered to have been incurred for travel between home and work.

As such, the costs you have incurred are as a consequence of living in one place and working in another and were incurred to enable you to commence, or return home after completing, your income earning activities. The expenses were not incurred in the producing your assessable income and are therefore considered private or domestic in nature and are not deductible.

Travel between two places of employment

Section 25-100 of the ITAA 1997 generally allows a deduction for expenses you incur in travelling directly between two places of work.

In your case, you are periodically required to travel between several different work sites. Therefore where you finish work at one work site and travel directly to the next work site in order to continue your work with your employer, you are entitled to a deduction for your travel expenses for this portion of your journey.

Accommodation expenses

As discussed above, some expenses are incurred in order to put you in a position to be able to earn your assessable income. For example, unless you get yourself to work it is not possible to earn your income.  Such expenses are incurred before you have commenced your duties and thus before your income is being earned (Lunney's Case).

Similarly, accommodation expenses incurred by an individual who lives away from home to carry out the duties of their employment will not be deductible. Expenses of this nature have been found to be private or incurred before or after the activity of earning assessable income.

In the case Federal Commissioner of Taxation v Toms (1989) 89 ATC 4373; (1989) 20 ATR 466, 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. On working days he would proceed by four-wheel drive vehicle from the base camp to predetermined logging areas within a radius of 20 kilometres. He would return home every weekend. The Federal Court ruled the only reason why the taxpayer had to incur expenses in providing temporary accommodation at the base camp was because he had chosen to reside at a place so far from where he was required to be to earn his income. As those expenses were dictated not by his work but by private considerations, they were not deductible.

Your case is comparable with the above case as your family home was in Town A and, because of your employment in Town B, you stayed in Town B during the week and incurred costs for short term accommodation at a park home in a caravan park.

These costs were incurred to enable you to stay in close proximity to your workplace and were a prerequisite to the earning of assessable income. Therefore, you are not entitled to a deduction, under section 8-1 of the ITAA 1997, as these expenses are considered to be private or domestic in nature and not incurred in producing your assessable income.

Further issues for you to consider

This private ruling has been limited to apply for only 4 financial years, from 2009-10 to 2012-13.

The limitation has been applied as the Commissioner would not normally rule for indefinite or extended periods as there may be changes to the facts of the arrangement or the law in question. Also, a public ruling may issue which affects the private ruling.

If the situation still applies at the end of the 2012-13 financial year, you may wish to again make an application for a private ruling.