Edited version of your private ruling

Authorisation Number: 1012113637004

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Subject: travel and meal expenses

Question 1

Are you entitled to a deduction for expenses in travelling to and from the airport when travelling interstate for work?

Answer

No.

Question 2

Are you entitled to a deduction for meal expenses when working in city C?

Answer

No.

This ruling applies for the following periods

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commenced on

1 July 2011

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You have started a new job.

You work four days a week in city C and one day a week in city B.

You and your family live in city B.

Your employer pays for your return airfare between city B and C as well as accommodation in city C and transport to and from the city C office.

When travelling to city C, you leave your car at the city B airport long term car park and incur these costs.

You also incur the costs of travelling in your car from home to the city B airport and back home as well as toll costs.

You will incur expenses for meals when in city C.

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.

A number of significant court decisions have determined that for an expense to be an allowable deduction:

§ it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense (Lunney v. FC of T; (1958) 100 CLR 478 (Lunneys case)), 

§ 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 v. FC of T, (1949) 78 CLR 47), and

§ it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income (Charles Moore Co (WA) Pty Ltd v. FC of T, (1956) 95 CLR 344; FC of T v. Hatchett, 71 ATC 4184).

Travel expenses

Generally a deduction is not allowable for the cost of travel between home and work as it is considered a private expense. Expenditure incurred in travelling to work is a prerequisite to the earning of assessable income rather than being incurred in the course of producing that income. Such expenses are incurred as a consequence of living in one place and working in another. That is, the essential character of the expenditure is of a private or domestic nature, relating to personal and living expenses and therefore not an allowable deduction (Lunney's case and Federal Commissioner of Taxation v Cooper (1991) 29 FCR 177; 91 ATC 4396; 21 ATR 1616). 

The essentially private character of travel between home and work is not affected by factors such as the mode of transport, the availability of transport, the lack of suitable public transport, the erratic times of employment, the time of travel, the distance of travel and the necessity of travel (Taxation Ruling IT 2543).

Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example, unless a person arrives at work it is not possible to derive income. The income earning duties do not generally commence until the arrival at a place of work and will cease upon departure from work. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income (Case V111 88 ATC 712).

A deduction is generally allowable for the cost of travelling to and from an alternative workplace. For example, travel to and from a different centre for a workplace meeting or training is an allowable deduction. As highlighted in paragraph 34 of Miscellaneous Taxation Ruling MT 2027, an alternative destination is not a regular place of employment.

In your case, you work at the city C office for four days a week and at the city B office for one day each week. Both these offices are a regular place of employment and therefore cannot be regarded as an alternative place of work.

Your travel to and from city C is not travelling on work, but rather travelling to and from work. City C is a normal place of work for you. While it is acknowledged that your usual home is in city B, it is not considered that your travel between city B and C is work related travel. Rather it is private travel carried out to enable you to be closer to the city C office and commence your employment duties. The distance of the travel does not alter the private nature of the travel.

The travel expenses are a prerequisite to the earning of assessable income and are not incurred in the actual performance of your work. Therefore, the associated travel expenses such as car expenses, toll expenses and city B airport expenses are not an allowable deduction under section 8-1 of the ITAA 1997.

The Commissioner accepts that expenses incurred in travelling between home and work may be deductible in limited circumstances, for example:

§ the taxpayer's employment is inherently of an itinerant nature,

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

§ the taxpayer's home constitutes a place of business and travel is between two places of employment or business.

The above exceptions do not apply in your case.

Meals

Expenditure on the daily necessities of life (for example, food and drink) is generally not deductible as it is not incurred in gaining or producing assessable income and is also considered to be private or domestic in nature.

Exceptions to this are where you are undertaking work-related travel and are required to stay away overnight or you work overtime and receive an overtime meal allowance.

In your case you do not receive an overtime meal allowance. Therefore we need to consider whether you were undertaking work related travel.

As stated above, it is considered that city C is your normal place of work. While it is acknowledged that your family and home is in city B, it is not considered that your travel between city C and B is work related travel.

As your city C meal expenses are not associated with any work related travel, they are not incurred in gaining or producing your assessable income. Rather they are a private expense and no deduction is allowable.

Other information

Please note, even where an allowance is received, you are not automatically entitled to a deduction for expenses incurred in relation to an allowance. The expenses must meet the criteria for deductibility. Therefore, even if you were to receive an allowance, no deduction is allowable for your travel and meal expenses.