Edited version of your private ruling

Authorisation Number: 1012126949551

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.

Subject: Home to work travel

Question

Are you entitled to a deduction for travel between home and work when carrying your tools?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

You are an employee.

You carry tools to and from work each day. The tools you carry are:

§ Case 1: 32cm x 42cm x 9cm - 4kg

§ Case 2: 36cm x 42cm x 10cm - 2.5kg

§ Case 3: 39cm x 52cm x 13cm - 6kg

§ 1 toolbox: 26cm x 47cm x 25cm - 23kg.

These cases and toolbox do not have locks on.

The three cases are not used every day for work. They are used occasionally. They stay in the boot of your car when not being used.

Your employer does not provide your work tools.

You have another large tool box that is locked and left at your place of employment. This tool box weighs over 100kg and is full with tools.

Your employer has insurance for tools. The insurance cover is $3,000 for theft and $5,000 for fire.

Your work tools are worth more than $5,000.

After you leave work, the workplace is open for approximately a further hour before it is locked.

You travel to and from work each day.

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 (Lunney's 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).

A deduction is generally not allowable for the cost of travel between home and the normal workplace as it is considered to be a private expense and not incurred in producing assessable income (Lunney's Case). The cost of travel between home and work is generally incurred to put a person in a position to perform duties of employment, rather than in the performance of those duties.

However, a deduction may be allowable if the transport costs can be attributed to the transportation of bulky equipment rather than to private travel between home and work (Federal Commissioner of Taxation v. Vogt [1975] 1 NSWLR 194; 5 ATR 274; 75 ATC 4073) (Vogt's Case). In this case, the taxpayer worked at various places and his employment created the necessity to transport his musical instruments. There was no other practical way of getting his instruments to the places where he was to perform and the associated travel deductions were allowable. The extreme bulk of the equipment was a decisive factor and the taxpayer was not merely keeping his violin and other equipment at home for safe-keeping and practice.

In Vogt's Case it was determined that where:

· a taxpayer keeps necessary equipment at home,

· which they need for performing work,

· and by reason of their bulk,

· such equipment needs to be transported by vehicle from the home to places of work, and

· the equipment is used at home,

then the expenses may be characterised as travel on work and therefore may be deductible.

Taxation Ruling TR 95/34 discusses the requirement to carry bulky equipment. Paragraphs 63 and 64 of TR 95/34 state that:

If the equipment is transported to and from work by the employee as a matter of convenience or personal choice, it is considered that the transport costs are private and no deduction is allowable.

A deduction is not allowable if a secure area for the storage of equipment is provided at the work place (see Case 59/94 94 ATC 501; AAT Case 9808 (1994) 29 ATR 1232).

The question of what constitutes bulky equipment must be considered according to the individual circumstances in each case.

In Crestani v. Federal Commissioner of Taxation 98 ATC 2219; (1998) 40 ATR 1037, (Crestani's Case), a toolbox which measured 57 centimetres by 28 centimetres by 25 centimetres and weighed 27 kilograms was considered as 'bulky', in the sense of 'cumbersome', and the toolbox was not easily portable. The transport cost was 'attributable' to the transportation of such bulky equipment rather than private travel between home and work. The employer did not provide a secure storage area for the toolbox and the use of public transport was not a viable option.

In Case Z22 92 ATC 230; 23 ATR 1189, the taxpayer was required to supply his own tools and received a tool allowance. The larger tools were kept in a standard-sized tool box which was stored in a padlocked mesh cage. The other tools were kept in a canvas bag which the taxpayer could carry over his shoulder. Although the taxpayer was provided with a locker at the airbase, he took the canvas bag home in the boot of his car every night. The taxpayer claimed a deduction for the costs of travelling to and from work by car and claimed that he had to take the tools home because the locker was not secure.

His claim was disallowed as it was not essential for the taxpayer to take his tools home. The tools could have been stored in the mesh cage. Alternatively, the taxpayer could have made his locker sufficiently secure. It could not be said that there was no other practicable way of getting his tools to the airbase. The driving was primarily to transport the taxpayer, and the bag was taken home because of convenience and a concern about security.

The case of Millgate v. Commissioner of Taxation [2000] AATA 1040 is also relevant in your situation. The taxpayer was a licensed aircraft mechanical engineer who transported his toolbox from home to work and back each day maintaining that security was not adequate to enable him to leave it at the maintenance base. Thefts had occurred in the past at the maintenance base. The employer did not have an alarm fitted in the storage area but did provide an area where the toolbox could be chained to steel A-frames.

When the AAT attended the work site, the taxpayer demonstrated that the chain and lock could be cut using the tools available in the general work shop area and contended that this made the area insecure. The Tribunal found that even though it was possible to cut the chain and for a toolbox to be stolen, the area was adequately secure. It stated that 'secure area' does not mean 'impregnable'. The Tribunal held that as the area for storage of toolboxes at the taxpayer's workplace was adequately secure, the transport of the tools was only a matter of personal choice and therefore not deductible.

In your case you leave one large tool box at work and transport other tools in your car. Most days you only require your 23kg toolbox for work and do not use your other cases in your day to day work. Although the total weight of your tool box and cases is over 30 kilograms, it is only the 23kg tool box that you use each day for work. It is considered that this tool box is easily transportable in your car and is not considered to be bulky or cumbersome.

Your case differs from Vogt's case as

· your home to work travel expenses are not incurred as part of the operations in which your earn your income,

· you do not have shifting places of work,

· the necessity of transporting tools is not a requirement of your employment,

· all your equipment is not essential to the carrying on of your daily income earning operations,

· you carry your three cases in case you need them, and

· your home to work travel expenses are not attributed to the carriage of your work tools.

Your toolbox is smaller in size and lighter than the toolbox considered in Crestani's Case and is not considered bulky.

After considering your specific facts, it is considered that your home to work travel is not an allowable deduction. This is based on the following factors:

· you carry your three cases in case you need them for work,

· these three cases are not used in your daily employment duties,

· the 23kg tool box is not sufficiently weighty or cumbersome to be classed as bulky,

· the tool box does not impede facile transportation,

· your home to work travel expenses are not considered to be sufficiently relevant and incidental to the derivation of your assessable income, and

· it is considered that the transportation of your equipment to and from work is unlike other cases where the home to work travel has been allowed.

Your home to work travel expenses enable you to arrive at your work place to earn your assessable income and is not incurred in the actual gaining or producing of your assessable income. Your travel is not considered to be undertaken to transport bulky equipment. The transportation of your tools to and from work does not change the character of your travel. Your home to work travel costs are considered to be private in nature and not an allowable deduction under section 8-1 of the ITAA 1997.

Please note, that as your equipment is not considered to be bulky, the issue of security at the work site is not relevant. However, the fact that some tools are kept at your place of employment and your employer provides insurance cover indicates that there is secure storage. It is questionable why the other tool box can not be padlocked to the larger tool box. It is considered that the transporting of your equipment to and from work is done more for safe keeping and a matter of convenience or personal choice. Although the work place may not be 'impregnable', it is locked each night and considered to be adequately secure.