| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your private ruling
Authorisation Number: 1012106807772
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
Are you entitled to a deduction for the expenses incurred travelling between your home and City A?
Answer
No.
This ruling applies for the following periods:
Year ended 30 June 2012
Year ended 30 June 2013
The scheme commences on:
1 July 2011
Relevant facts and circumstances
You are employed interstate in a remote area.
Your accommodation costs are paid by the employer whilst on site.
The closest city to the worksite is City B.
Your employer pays for the cost of travel between City B and the state capital City A.
You are responsible for the cost of travel between City A and your home in City C.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1.
Reasons for decision
Summary
The travel expenditure you incur is not considered to be expenditure incurred in the production of your assessable income. They are private expenses and therefore you are not entitled to claim a deduction for them.
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.
Lunney v. Commissioner of Taxation [1958] ALR 225; 1958 0311H HCA; 100 CLR 478; (1958) 11 ATD 404; (1958) 32 ALJR 139 (Lunney's case) introduced what is now regarded as the essential character test. This test requires that for an expense to be deductible, it must have the essential character of a business or income producing expense. The taxpayer in this case sought to deduct the cost of travelling from his home to his work. The expenses were disallowed as being private and domestic, establishing the broad principle that costs incurred because of living in one place while working in another cannot be regarded as deductible. The reasons given by the High Court were twofold.
The fact that certain expenditure, such as travelling to work, must be incurred in order to be able to derive assessable income, does not necessarily mean that the expenditure is incidental and relevant to the derivation of assessable income or that it is incurred in the course of gaining or producing assessable income. It is a prerequisite to the earning of assessable income rather than being incurred in the course of gaining that income.
The essential character of the travel to and from 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 what distance from work.
There are exceptions where travel between home and work are deductible, for example where you transport bulky tools and equipment, your home is a base of employment and you commence your duties prior to leaving home, or you regularly work at more than one site each day before returning home.
The general principles established in Lunney's case have been followed in many subsequent cases and would hold equally for the travel expenses in your case. That is, the travel expenses are a prerequisite to the earning of your income and are not incurred in the course of gaining or producing income. Your circumstances do not meet any of the exceptions which would allow your travel expenses to be deductible.
The travel expenses you have incurred are not considered to be as a result of your income earning activities. The expenses are incurred by you in putting yourself in a position where you can perform your duties, rather than in the performance of your duties. Therefore you are not entitled to a deduction for the travel expenses you incur.