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Ruling

Subject: Home office, meal, clothing and travel expenses

Question 1

Are you entitled to a deduction for the expenses you incur to purchase food while you are in City A?

Answer

No.

Question 2

Are you entitled to a deduction for the occupancy expenses you incur in regards to your home office in City A?

Answer

No.

Question 3

Are you entitled to a deduction for the running expenses you incur in regards to your home office in City A?

Answer

Yes.

Question 4

Are you entitled to a deduction for the expenses you incur travelling between City B and the teaching facility?

Answer

No.

Question 5

Are you entitled to a deduction for the travel expenses you incur during the field familiarisation trips?

Answer

Yes.

Question 6

Are you entitled to a deduction for the expenses you incur to clean your high visibility jackets and your shirts that display your employer's logo?

Answer

Yes.

Question 7

Are you entitled to a deduction for the expenses you incur to clean the conventional clothing that you wear to work?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2011

Year ended 30 June 2012

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You are employed at a teaching facility in City A.

Your home and family are in City C.

You were recruited to the position in City A.

Due to the distance between your home and work you rented a space in the City A area (City B) and you commute from City C on a weekly basis.

The renting of this space provided you with a bedroom and an office.

The office has communication and computing facilities that assist you to carry out your duties.

While in City B you incur expenses to purchase some food supplies that would normally be available at home, as well as some meals.

You are not paid a meal allowance.

You incur expenses for the laundering and dry cleaning of work clothing which cannot be done at City B.

Your work clothing includes shirts with a registered logo attached, a high visibility safety vest and some conventional clothing.

You use a private vehicle to complete the round trip between City B and the teaching facility.

You undertake occasional field familiarisation trips, with and without students.

They are normally done during work hours, however sometimes they are done outside of work hours as it may be more beneficial.

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) 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.

Meals and accommodation

As a general rule, the cost of meals, incidentals and accommodation while working away from home are not allowed as a deduction. The place where a taxpayer stays whilst away from their home is considered to be their usual place of residence for that period. These costs are essentially living expenses of a private or domestic nature. The fact that income cannot be earned unless certain expenses are necessarily incurred is not determinative of deductibility.

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 meal, accommodation and incidental 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.

You incurred accommodation expenses as a result of your normal dwelling being in City C, and being employed in City A. The accommodation expenses were incurred to put you in a place where you are closer to your place of employment, and are not related to the actual performance of your duties.

As the accommodation and food expenses were not incurred in the course of gaining or producing your employment income and are private in nature you are not entitled to a deduction.

Home Office

As a general rule, expenses associated with a taxpayer's home are of a private or domestic nature and are not tax deductible. However, in the case of a home office, there are two exceptions to this general rule. A deduction may be allowable if:

· part of the home is used for income producing purposes and has the character of a 'place of business' or

· part of the home is used in connection with a taxpayer's income earning activities but does not constitute a 'place of business'.

Taxation Ruling TR 93/30 states that home office expenses can be divided into two broad categories - occupancy and running expenses. Occupancy expenses relate to the ownership of a home such as rent, rates and insurance. Running expenses relate to the use of the facilities within the home such as electricity.

If an area of the home has the character of a 'place of business' then some part of both occupancy and running expenses may be deductible. However, where an area of the home is simply used in connection with income producing activities, but does not have the character of a place of business, only running expenses are allowable.

Whether an area of the home has the character of a 'place of business' is a question of fact which depends on the particular circumstances of each case. The following factors, none of which is necessarily conclusive on its own, may indicate whether or not part of the home has the character of a 'place of business':

· the area is clearly identifiable as a place of business

· the area is not readily suitable or adaptable for use for private or domestic purposes in association with the home generally

· the area is used exclusively for carrying on of a business, or

· the area is used regularly for visits of clients or customers.

A place of business will exist only if:

· it is a requirement inherent in the nature of the taxpayer's activities that the taxpayer needs a place of business

· the taxpayer's circumstances are such that there is no alternative place of business and it is necessary to work from home, and

· the area of the home is used exclusively or almost exclusively for income producing purposes.

TR 93/30 uses the example of a doctor's surgery located in a doctor's own residence, as an instance of a home office being a place of business. A further example of a home office being a place of business, is where part of a taxpayer's home is used as the taxpayer's sole base of operations for income producing activities, ie where no work location is provided to an employee by the employer (refer paragraph 4 of TR 93/30).

TR 93/30 also provides examples of where a taxpayer maintains an office or study at home as a matter of convenience rather than as a place of business. These include:

· a barrister who reads client briefs at home;

· a teacher who prepares lessons or marks assignments at home; and

· an insurance agent who maintains client files and occasionally interviews a client in his or her home office

In your case you undertake a number of activities in an office where you reside. Your activities are of a similar nature to those of a teacher who prepares lessons at home. Subsequently, your office is considered to not have the character of a place of business and is instead an office or study maintained at home as a matter of convenience. Therefore, you are not entitled to a deduction for the occupancy expenses of the office. However, you are entitled to a deduction for the running expenses of the office space.

Travel expenses- City B to teaching facility

The cost of relocating from a taxpayer's normal residence to accommodation near their workplace is not allowed as a deduction. Travel from home to work is also generally private in nature and not deductible.

Taxation Ruling IT 112 states that fares paid by taxpayers to enable them to go day by day to their regular place of employment or business and back to their home are not deductible against the assessable income earned by them from their employment or business.

Taxation Ruling IT 2543 states that the mode of transport, the availability of transport, the lack of suitable public transport, the erratic hours and times of employment, the on-call nature of the employment, the time of travel, the distance of travel, the unavailability of residential accommodation near the place of work, the frequency of travel and the necessity of travel are not factors which will alter the essential character of travel between home and work

You have incurred expenses related to travelling to a place of accommodation closer to your place of work. You have also incurred expenses in travelling between your place of accommodation in City B and the teaching facility. These expenses are considered to be of a private or domestic nature and are therefore not deductible.

Travel expenses- Field familiarisation trips

Taxation Ruling IT 2199 outlines the situation where travelling expenses are deductible between different places of employment.

Paragraph 4 of the Ruling states that travelling between two places of employment should be allowed where the taxpayer does not live at either of the places and the travel has been undertaken for the purpose of enabling the taxpayer to engage in income producing activities. 

However, a deduction is only allowable for travel expenses incurred when travelling directly between two places of employment. Where a person breaks the trip between places of employment to return home, or travel elsewhere such as a shopping centre, then the travel expenses are not deductible.

Additionally, travel between home and work may be allowable where the travel is to an alternative workplace or workplaces under certain circumstances.

Paragraph 34 of Taxation Ruling MT 2027 states that travel from home to an alternative work place is allowable where the following criterions are met:

· the employee has a regular place of employment;

· in the performance of their 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.

MT 2027 states that a deduction is allowable for the cost of travel from the normal work place to other work places. A deduction is also allowable for the cost of travel from the alternative work place back to the normal work place or directly home. This travel is undertaken in the course of gaining assessable income and the cost of the travel is allowable as a deduction.

In your situation, where you travel between the teaching facility and the location for a field familiarisation trip you will be entitled to claim a deduction for your travel expenses. Additionally, you will be entitled to a deduction where you travel between home and the location for a field familiarisation trip.

Laundry and dry cleaning

Taxation Ruling TR 98/5 deals with claims for deductions for laundry expenses. This ruling states that in order for laundry expenses to be deductible the expense must be incurred in the course of producing salary or wage income. If the laundry expense is partly for work purposes and partly for private purposes, then only the work related portion is an allowable deduction.

A work related deduction for laundry expenses would be allowable for the cost of washing, drying or ironing clothes that fall into one or more of the following categories:

· compulsory uniform/wardrobe

· non-compulsory uniform/wardrobe

· occupation specific clothing

· protective clothing

A deduction is not allowable for the cost of laundering conventional clothing.

You have incurred expenses laundering and dry cleaning your work clothing. As your shirts with the registered logo are non-compulsory uniforms and the high visibility vests are protective clothing you are entitled to a deduction for expenses you incur laundering these items.