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Ruling

Subject: Travel, accommodation, meal and incidental expenses

Question 1

Are you entitled to a deduction for the cost of travelling between home and work?

Answer

No.

Question 2

Are you entitled to a deduction for accommodation, meal and incidental expenses incurred while working away from home?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2011

Year ending 30 June 2012

The scheme commenced on

1 July 2010

Relevant facts

You are employed interstate.

You have been working interstate for a significant period.

You work on a roster basis and travel from your home in one state to your job in another state, up to several times per month.

Work in your occupational field is extremely limited in your state and is generally highly transient nationally and predominantly contractual.

Working interstate or away from home is generally the norm in your industry and employers do not agree to cover the entire costs of workers who travel to the employer's contract site on certain contracts. This is the case with regards to the contract and site for your present employment.

You have incurred expenses for travel, accommodation, meals and incidentals.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Summary

You are not entitled to a deduction for the cost of travelling between home and work as it is considered a private expense.

The costs you incur for accommodation, meals and incidentals while working interstate are of a private nature and are incurred as a consequence of having your home in one place and working in another. Therefore, they are not incurred in gaining or producing your assessable income and are not deductible.

Detailed reasoning

Section 8-1 of the Income Tax Assessment Act 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.

Travelling to and from work

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: Taxation Ruling TR 95/34.

The essential character of travel between home and work is that of a private and domestic nature, related to personal and living expenses as part of the taxpayer's choice of where to live, in choosing to live away from and at what distance from work.

The travel expenses you have incurred are not considered to be incurred in the course of undertaking your income earning activities. Rather the expenses are incurred by you in putting yourself in a position where you can commence performing your duties, rather than in the performance of those duties. Therefore you are not entitled to a deduction for the travel expenses you incur as they are considered private in nature.

Accommodation, meal and incidental expenses

Generally, accommodation expenses are private in nature and are not deductible. In Lunney v. FC of T (1958) 100 CLR 478 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.

The issue of expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location was considered in FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 (Toms' Case).

In Toms' Case, 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 in Grafton. He claimed it was too far to travel each day to his work in the forest, so that it was necessary to establish a caravan at the camp. He would return home on weekends. He claimed the costs of maintaining his caravan and other living expenses such as the cost of heating and lighting. The Federal Court considered that the caravan was rendered necessary as much by the taxpayer's choice of the place of his residence in Grafton as by his choice of employment in the forest, and its purpose was to enable him to retain his residence at Grafton although employed in the forest. It was held that the expenses incurred in relation to the temporary accommodation near the workplace while maintaining a family residence in another location were dictated not by his work but by private considerations, and therefore were not deductible.

In your case, you incurred expenses for accommodation, meals and incidentals due to having your home in one state and your employment in another. Whilst the expenses would not be incurred but for the distance of your work place from your family home, the expenses are a prerequisite to the earning of assessable income. That is, they are incurred in order to put you in a position to be able to earn income but are not incurred in the actual course of gaining or producing that income. Also, the expenses are considered to be private in nature as they are incurred due to your choice of where you live and where you work.

A deduction is therefore not allowable for your accommodation, meal and incidental expenses.