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Ruling

Subject: work related expenses - home to work travel

Question 1

Are you entitled to a tax deduction for expenses you incur in travelling between home and work?

Answer

No

This ruling applies for the following periods:

Year ending 30 June 2011

Year ending 30 June 2012

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You are an employee. Your work involves regularly travelling to a wide variety of locations, intrastate, interstate and overseas.

Your employer has had an office for the entire time of your employment.

Your home is 2 hours away from your work.

Your work involves working at your employer's office, clients' premises and occasionally at hired venues. Your work at clients' premises generally takes from 1 to 5 days at a time. The work you undertake at clients' premises is scheduled in advance so you know where you will be working.

You work at many locations but not generally on the same day. Occasionally you will have a meeting at your employer's office on the same day as you attend a client's premises.

You sometimes stay with family members near your work as a matter of convenience. For example, for a 5 day training course you will stay with a family member rather than return home each evening.

You also do some work at home. You could do this work anywhere you had access to an internet connection.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Summary

You are not entitled to a deduction for travel expenses from home to work because the expenses are private in nature.

Detailed reasoning

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, or relate to the earning of exempt income.

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. 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 (see paragraph 77 of Taxation Ruling TR 95/34).

However, there are situations where it has been accepted that travel by employees from home to work is deductible. These exceptions include:

§ where the employment can be construed as having commenced at the time of leaving home, for example a doctor on call (the home is a base of operations)

§ where you travel between home and shifting places of work, that is, an itinerant occupation

§ the transportation of bulky equipment in some circumstances.

In your situation, you are not required to transport bulky equipment between home and your place of employment. Therefore whether your work commenced before leaving home and itinerancy will be examined further.

Home is a base of operations

Taxation Ruling TR 95/34 states that expenses are deductible where an employee travels between home based employment and another place of employment. However, the fact that the employee chooses to perform work at home associated with employment conducted elsewhere is not sufficient for the home to constitute as a base of operations.

Paragraph 56 of TR 95/34 states that an employee's home may constitute a base of operations if the work is commenced at or before the time of leaving home to travel to work and the responsibility for completing it is not discharged until the taxpayer attends at the work site. Whether an employee's home constitutes a base of operations depends on the nature and the extent of the activities undertaken by the employee at home. 

In FC of T v. Collings 76 ATC 4254: (1976) 6 ATR 476 (Collings case) a highly trained computer consultant whose employment required her to be on call 24 hours a day was allowed a deduction for car expenses incurred by her in travelling between home and work solely outside the normal daily journeys to and from work. In order to assist in diagnosing and correcting computer faults while at home, she was provided by her employer with a portable terminal.

In accordance with the terms of her employment, she used the terminal at home in the performance of her duties. If she could not resolve the problem over the telephone, she would return to the office in order to get the computer working.

In these particular circumstances, the expenses were found to be incurred in gaining or producing her assessable income and were not of a private or domestic nature.

The abnormal journeys to and from home were made necessary by the very nature of the employment and of her duties.

§ The taxpayer had a very special employment unlike most on call workers and was required to obey a summons to cope with some emergency

§ The taxpayer was not choosing to do part of the work of her job in two separate places

§ The two places of work are a necessary obligation arising from the nature of her special duties

§ When called at her home, the taxpayer immediately had the responsibility of correcting the malfunction in the computer. She might there and then diagnose the trouble, and provide the remedy or she might have to make the journey to the office in regard to a particular problem that had arisen.

In your case your home does not constitute a base of operations. The work you do at home is separate and distinct from the work that you do at clients' premises or your employer's office. The work carried out at your home could be carried out at your employer's office or any other location with an internet connection. The work you do at a client's premises or your employer's office is not a continuation of work commenced at home.

Itinerant worker

In the case of itinerancy, your occupation may be considered to be of an itinerant nature where:

§ travel is a fundamental part of the your work

§ there is a 'web' of work places in your regular employment

§ you continually travel from one work site to another.

In FC of T v. Wiener 78 ATC 4006; (1978) 8 ATR 335 (Wiener's case) a teacher was required to teach at a minimum of four different schools each day, and comply with a strict timetable that kept her on the move throughout each of these days. Smith J concluded that travel was inherent in her employment because the nature of the job itself made travel in the performance of her duties essential, and said:

...that travel was a fundamental part of the taxpayer's work, is not open to challenge. Viewed objectively, it does not seem to me to be open to question that the taxpayer would not have been able to perform her duties without the use of her motor vehicle. ...it was a necessary element of the employment that on those working days transport be available at whichever school the taxpayer commenced her teaching duties and that transport remained at her disposal throughout each of those days.

Although an employee may perform duties at more than one work location, this fact in itself may be insufficient to constitute a 'web' of work places for the purpose of itinerancy. Each work place may be regarded as a regular or fixed place of employment. If the teacher in Wiener's case had attended only one school each day, each school would be regarded as a regular place of employment.

In Case U97 87 ATC 584; AAT Case 68 (1987) 18 ATR 3491 (Case U97), the taxpayer was employed as a fireman. He was attached to a fire station located close to his home in a northern suburb of Sydney, but for some years worked as a relief fireman. In that capacity, he was commonly sent to other fire stations in the Sydney fire district. The only distinguishing feature of his claim was that he travelled to one outer station regularly for a number of days then another outer station for another period. In deciding that the taxpayer was not itinerant, Senior Member McMahon stated (ATC at 588; ATR at 3495-3496), "there is not the web of workplaces that one looks for as a structure for the applicant's working life if that life is to be regarded as itinerant".

The principles examined in these cases may be further illustrated by the following two examples provided in TR 95/34:

Eleni is an agency nurse who travels to several hospitals to relieve staff shortages. She is employed by the hospital for whom she performs the duties. Eleni remains at the one hospital until completion of her shift. Travel is not a fundamental part of Eleni's employment, as she is not required to travel in the performance of her work once she commences duty. Eleni's employment is not considered to be itinerant.

Leo works for an accountancy firm and attends head office three days a week. He works the remaining two days at a suburban office. Leo's work does not display a 'web' of work places because:

§ upon commencement he is not required to travel in the course of his duties

§ Leo has two regular places of work.

The element of uncertainty of location is generally another distinct characteristic of itinerant employment. Unlike an ordinary worker who makes the daily journey to his or her regular place of work, the itinerant worker often cannot be certain of the location of their work sites.

The concept of uncertainty was highlighted in Case T106 86 ATC 1192; 18 ATR 3093, where the taxpayer was often uncertain about the work site he would be required to attend until each actual day of work. The Senior Member said:

He does not work according to any regular pattern as to work site; there is no long-term plan by which he can predict what will be required of him in the future; and there is no certainty as to the range of work sites he may be called on to attend over a period. In my view his occupation is that of an itinerant worker.

Applying the above principles to your situation we can see that:

§ Travel is not a fundamental part of your work. You carry out your work at either your office or a client's premises or a hired venue. You do not travel in the course of your duties.

§ There is not a web of work places in your work. You work at different locations but each location is considered to be a regular place of employment for the period you are there.

§ You do not continually travel from one work site to another. Your work may require you to work at different locations, but not generally on the same day.

§ There is no uncertainty of location in your work. You know in advance where you will be working.

Your work is not considered to be of an itinerant nature.

Work travel on way to or from work

Miscellaneous Taxation Ruling MT 2027 provides that there will be cases where, while the nature of the employment is not inherently itinerant, an employee will be required in the ordinary course of duties to visit clients or customers.

Where return travel of this kind is undertaken from the employee's usual place of employment it will clearly constitute business travel. In your case, when you travel from your employer's office to a client's premises, or vice versa, these trips will clearly be travel for work and therefore deductible.

The position may, however, be less clear where you travel from home directly to the client's premises and then on to the office. Such travel may be undertaken in a variety of circumstances, for example:

§ the client's premises may be located at a point on or close to the normal route travelled by the employee to the office

§ alternatively, the employee may be required to travel in the opposite (or a markedly different) direction to the normal work route

§ in some cases, the distance travelled to reach the client's premises will be substantially greater than the direct route to the office; even to the extent that the employee may need to devote the whole day to the visit

§ the visit to the client may be the first of a number made before travelling to the office.

Paragraph 34 of the ruling states that travel from home to an alternative work place is allowable where the following criteria are met:

§ the employee has a regular place of employment to which he or she travels habitually

§ in the performance of his or her duties as an employee, travel is undertaken to an alternative destination which is not itself a regular place of employment (i.e., this approach would not apply, for example, to a plant operator who ordinarily travels directly to the job site rather than calling first at the depot or to an employee of a consultancy firm who is placed on assignment for a period with a client firm); and

§ the journey is undertaken to a location at which the employee performs substantial employment duties.

In your case you attend different locations with each location considered to be a regular place of employment. When you travel from home to a client's premises, you are travelling to your regular place of employment for that day, rather than to a client on the way to your regular place of employment. Therefore the principles discussed in MT 2027 do not apply and the travel is not deductible as it is private in nature.

On the occasions you travel from that work location to either your office or another client, this travel is between work locations and is deductible.

Conclusion

You home does not constitute a base of operations, nor is your employment itinerant. Your work does not usually involve travelling to alternative work places on the same day. The travel costs you incur travelling from your home to your work locations are incurred to put you in a position to undertake your employment duties. Therefore the expenses are private in nature and not deductible.