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Ruling

Subject: accommodation expenses

Question

Can you claim a deduction for living away from home expenses in relation to your accommodation at a staff quarters?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2011

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You are employed on a permanent basis as a train driver in a town X

Your permanent place of residence is approximately 220kms away in town Y, to which you return to on your days off work.

You also incur cost weekly of a room in the staff quarters in town X, which you use during your working shifts.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) states you can deduct from your assessable income any loss or outgoing that is incurred in gaining or producing your assessable income or is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.

However, section 8-1 of the ITAA 1997 states a loss or outgoing is not deductible if it is of a capital, private or domestic nature.

As a general rule, expenditure on accommodation while living away from home cannot be deducted because these outgoings are essentially 'living expenses' of a private or domestic nature.

Accommodation expenses enable a taxpayer to stay in proximity to their work place and arrive at work on time. Accommodation expenses are a prerequisite to the earning of assessable income rather than expenses incurred in the course of gaining or producing that income.

The history of case law includes many examples of where deductions for accommodation expenses were disallowed, which include the following:

· A real estate agent lived 25 miles out of the city and conducted a business in the city and suburbs. They were denied a deduction for the cost of lodging at a city club during the week to facilitate the operation of the business (8 TBRD Case H104).

· A pathologist assisting the local coroner at Bendigo, a country town 150km from his family home, was denied a deduction for the rental of a flat in the town where he stayed overnight after doing autopsies (Federal Commissioner of Taxation v Charlton, 84 ATC 4415).

· Each Monday, a forest worker drove by four-wheel drive vehicle 108km to a forest campsite and occupied a caravan until the following Friday, when the worker returned to the family home. The Federal Court disallowed a deduction for the caravan and other living expenses. The court ruled the taxpayer incurred the expenses in providing temporary accommodation because the taxpayer had chosen to reside at a place so far from where it was necessary to be in order to gain income (Federal Commissioner of Taxation v Toms, 89 ATC 4373).

· A clerk employed by a public authority and promoted to a position in a country town, away from family, was disallowed rent paid on a cottage (Case K29, 78 ATC 281).

In your case, you work and live away from home rather than travel in the course of work. Similar to the above cases, you have elected to have your permanent residence away from your work so that you must find board and lodging away from your permanent residence. This is by your own choice and not by reason of any necessity arising out of your employment.

It follows you cannot claim a deduction for your accommodation expenses under section 8-1 of the ITAA 1997 as these expenses are private and domestic in nature and not incurred in producing your assessable income.