Edited version of your private ruling

Authorisation Number: 1012064114649

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: Travel expenses

Question 1

Are you entitled to a deduction for accommodation and meal expenses incurred while working 2.5 hours from your normal place of residence?

Answer

No.

Question 2

If the expenses are deductible, is it possible to use the exception from substantiation detailed in Taxation Ruling TR 2004/6 even though a travel allowance is not received?

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 obtain employment through a recruitment agency.

During the 2010-11 financial year you worked at various locations, both close to your home and some distance away.

For a period during the 2010-11 financial year you worked at a location approximately 2.5 hours away from your residence. During this time you travelled from home at the beginning of the week, stayed in paid accommodation during the week and returned home on weekends. You also paid for food during this period.

You did not receive a travel allowance.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Subdivision 900-B

Income Tax Assessment Act 1997 Subdivision 900-E

Reasons for decision

Question 1

Summary

Expenses incurred for accommodation and meals when travelling to a workplace which is distant from your home address are private expenses and therefore not deductible.

Detailed reasoning

Work related expenses generally fall for consideration under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). This section allows a deduction for losses and outgoings which are incurred in the course of gaining or producing assessable income, unless the losses or outgoings are capital, or are of a capital, private or domestic nature.

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 & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431), and the expenditure must not be capital, private or domestic in nature.

The Commissioner's view on the deductibility of accommodation, meals and incidental expenses incurred during the course of a normal working day is that they are a private expense and not deductible.  Accommodation, meals and incidental expenses, incurred by an employee who lives away from home, to carry out the duties of their employment, at their place of employment will not be deductible. 

The expenses you incurred are not deductible travel expenses. Travel expenses are defined as expenses incurred by an employee in the course of performing their duties as an employee. When an employer is travelling on business on behalf of an employer, expenses of travelling are incidental to the proper carrying out of the employment function and do not have the character of being private or domestic expenses, and are therefore deductible.

In your case, you have not demonstrated that you were required to travel in the course of performing your employment duties, only that you incurred expenses in being accommodated closer to your worksite due to the distance the place of employment was from your normal place of residence. It was your choice to accept employment in a location which would require this expenditure.

As such, the accommodation expenses you have incurred are to enable you to stay in proximity to your work place and arrive at work on time. They are a prerequisite to the earning of assessable income and are not expenses incurred in the course of gaining or producing that income. The expenses you have incurred for food are also considered private in nature and are therefore not deductible.

Question 2

Summary

The exception from substantiation does not apply unless a travel allowance is received and the expenses are deductible under section 8-1 of the ITAA 1997.

Detailed reasoning

Under Subdivision 900-B of the ITAA 1997, a deduction is not allowable for a work expense, including a meal allowance expense or travel allowance expense, unless the expense qualifies as a deduction under a provision of the Act and written evidence of the expense has been obtained and retained by the employee taxpayer.

The objective of the substantiation exception for travel and overtime meal allowance expenses provided for in Subdivision 900-B of the ITAA 1997 is to relieve taxpayers covered by the exception from the requirement to substantiate claims for deductible expenses by using detailed calculations, records or receipts. If a claim for expenses that are covered by a travel allowance or overtime meal allowance qualifies for exception from substantiation, it is not necessary to keep written evidence as would otherwise be required under Subdivision 900-E of the ITAA 1997.

For domestic or overseas travel allowance expenses to be considered for exception from substantiation, the employee must be paid a bona fide travel allowance. The allowance must be paid to cover work-related travel expenses incurred for travel away from the employee's ordinary residence, undertaken in the course of performing duties as an employee (subsection 900-30(3) of the ITAA 1997) and which involves sleep away from home. The work-related travel expenses must be for accommodation, or food or drink, or expenses incidental to the travel.

A travel allowance that is not paid or payable to cover specific work-related travel is not considered a travel allowance for the purposes of the exception from substantiation.

In your case, your accommodation and meal expenses were not incurred while you were travelling in the course of carrying out employment duties and are therefore not deductible. Consequently, even if your employer paid you an allowance in respect of these expenses, the substantiation exception is not applicable.