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Ruling

Subject: motor vehicle expenses

Question 1

Are you entitled to claim a deduction for motor vehicle expenses for travel between home and your work and your work and home as you are required to carry tools necessary to perform your duties?

Answer: No

Question 2

Are you entitled to claim a deduction for motor vehicle expenses on those occasions where you travel from your home to a patient's home and then on to your work place (and vice versa)?

Answer: Yes

Question 3

Are you entitled to claim a deduction for motor vehicle expenses on those occasions where you travel from your home to a patient's home and return while you are 'on-call' after hours?

Answer: Yes

This ruling applies for the following period

Year ended 30 June 2011

Year ended 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts and circumstances

Your income earning activity is that of a general medical practitioner.

Your principal place of business is a medical centre. However, you are also required to be 'on call' after hours.

When you are called after hours, you provide a consultancy service first, and if required, you travel to the patient's home. Due to this requirement of having to travel to a patient's home, it is necessary that you carry a medical bag (for surgical tools) and a medical sharps waste bin in your vehicle at all times. You state that the medical bag and waste bin are not bulky or heavy equipment.

The types of travel under taken include:

§ from your home to work and work to your home

§ from your home to a patient's home and return

§ from your home to a patient's home and then to your workplace.

You state that you are basically on call all the time, but are not called out after hours every night.

You state that the vehicle is used solely for business purposes.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Summary

The costs incurred for travel expenses between your home and work and, your work and home, despite the fact that you carried tools, were incurred to enable you to commence, or return home after completing, you income earning activities. They 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.

However, the costs you incurred for travel expenses between;

§ your home and a patient's home and return, while 'on-call' after hours

§ between your home and a patient's home and then onto your work place or vice versa.

are deductible expenses as they were incurred in the production of your assessable income.

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.

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.

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

§ the home constitutes a place of employment and travel is to a workplace to continue work

§ the employment is inherently of an itinerant nature

§ the taxpayer has to transport by vehicle bulky equipment necessary for employment.

Home constitutes a place of employment

In your case, your home does not constitute a place of employment as you only perform ad-hoc work related duties at your home, as and when an after hours call arises. However, where a taxpayer is 'on call' after ordinary hours they may be allowed a deduction for the cost of travel between home and a place of work.

Taxation Ruling IT 112 provides that theses deductions will be allowed in cases where, for example, a medical practitioner who holds an appointment at a hospital is required to be on call and accessible by phone to cope with emergency cases and who gives medical instructions over the phone prior to leaving home to travel to the hospital. In this situation, it could be considered that his responsibility for the patient begins at home and therefore he commenced his income earning activity at home on receiving the call. As such, the cost of travel to and from the hospital would be considered a deductible expense.

In your case, the travel undertaken between your home and your patient's home, while 'on call' after ordinary hours would be considered similar to the above situation and therefore incurred in producing your assessable income. Accordingly, the costs incurred for this travel would be a deductible expense under section 8-1 of the ITAA 1997.

Employment is inherently of an itinerant nature

The following characteristics have emerged as being indicators of itinerancy:

§ travel is a fundamental part of the employee's work

§ the existence of a 'web' of work places in the employee's regular employment, that is, the employee has no fixed place of work

§ the employee continually travels from one work site to another. An employee must regularly work at more than one work site before returning to his or her usual place of residence

However, Taxation Ruling MT 2027 provides that there will be cases where, while the nature of the office or employment is not inherently itinerant, a taxpayer will be required in the ordinary course of duties to visit clients. Examples would occur in the work of employees engaged as accountants, solicitors and doctors. In these cases the total journey from the employee's home to the client's premises and on to the office should be accepted as business travel. This is where:

§ 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

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

In your case, your principal work place is that of the medical centre. You advise that on occasion you may be called out to a patient's home to perform your work however, this is only on an ad-hoc basis and therefore would not amount to being inherently of an itinerant nature. Although, the occasions that you travel from home to a patient's home and then on to the medical centre would constitute business travel and therefore you are entitled to a deduction for your travel expenses for this portion of your journey.

Transporting bulky equipment necessary for employment

In your case, you advise that the medical bag and medical waste bin that you must carry are not particularly bulky or heavy items although they are necessary for your employment. Therefore, despite the fact that the items are necessary for your duties, you are not entitled to a deduction for home to work travel expenses simply on the basis that you always carry these items in your motor vehicle whether you visit a patient's home or not.

Conclusion

You are not entitled to a deduction for travel expenses incurred for home to work and work to home travel, despite the fact that you always carry a medical bag and medical sharps waste bin in your vehicle. These expenses were incurred to enable you to commence, or return home after completing, your income earning activities and were not incurred in producing your assessable income. They are considered to be private or domestic in nature.

However, you are entitled to a deduction for travel expenses incurred, under section 8-1 of the ITAA 1997, for those occasions when you:

§ travel between your home and your patient's home and return while 'on call' after hours

§ travel between your home to a patient's home and then onto work, and vice versa

as they are considered to be incurred in the production of your assessable income.