Edited version of your private ruling

Authorisation Number: 1012128867963

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Subject: deductibility of motor vehicle expenses

Questions and Answers

1. Are you entitled to a deduction for the cost of using your motor vehicle to travel from your home to the office where you complete work on a contractual basis?

Answer: No

2. Are you entitled to a deduction for the cost of using your motor vehicle to travel to and from this office to the client's premises?

Answer: Yes

3. Are you entitled to claim a deduction for the cost of using your motor vehicle to travel to the client's premises, where that travel is a leg of the journey between your home and the contracting company's office?

Answer: Yes

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

27 June 2011

Relevant facts

You are in a service industry and you recently left full time employment to become a sole trader/contractor.

You contract to another company and invoice them for the work you do for their different clients. They then invoice the clients for payments.

You require a vehicle to travel to different sites and client locations at anytime if required or requested.

You do a small percentage of work at your home office, including your business accounts.

From your home office to the company's office is 125 km one way (250 km round trip per day).

You are also required to travel to clients' sites most days each week.

You go to the company's office as you may be required to undertake meetings or work with their staff on projects.

The equipment you carry in your vehicle includes but is not limited to:

· safety/site equipment and PPE clothing, as you wear office clothing everyday

· 1m long spirit level

· string lines

· laser levels/measuring (small calculator size)

· tape measures

The vehicle is solely used for business purposes and you have kept a log book for all travel since its purchase. You own a motor bike and use your partner's car on the days you do not work.

You are constantly required to travel to a client's workplace as a part of contracting obligations. As a sole trader, your residence is your registered business location and there for contract work through the company and subsequently contract jobs to other clients and projects.

There is no written contract to you independently. You complete work through the company as requested by clients at a fixed rate.

Your work includes but is not limited to :

· liaising with company clients

· measuring equipment/plant at any given site (using your own vehicle and equipment)

· provide design work as requested by company clients

· setup and maintain drafting templates and standard drawings.

The company's office provides space for you to carry out required work. This does not include any space for your equipment that is kept permanently within your vehicle.

Predominantly within the company's office you will undertake project meetings.

Details of work completed at both the company's office and your home office include and again not limited to:

· compile the information you have taken on site

· complete drafting work on the company's computers/networks

· transfer work you have completed at your home office to the company's network

· help train the company's junior staff members

· print, check and email the company's clients.

The percentage depends on the project you are completing. Over the last six months, the percentage would be around 85-90% in their office , 10-15% within your home office.

You travel directly from your home office to the required sites more often than not. Travel to these sites from the company's office is also a requirement on occasions if and when details need updating or for new client meetings. From these sites/clients you will travel to the company's office or home depending on the required work, or if you need to discuss/meet with company representatives.

You travel to these sites, on average, 2 plus times per week to finalise measurements, plans etc to ensure your work is to the clients requirements.

The clients would get the impression that you represent the company. Some clients are aware that you are contracting to the company. You have been supplied with an office shirt that has the company logo. All site equipment and clothing is your own and has no reference to the company.

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.

Travel between home and workplace

A deduction is generally not allowable for the cost of travel by an employee/contractor between home and their 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/contractor in a position to perform duties of employment, rather than in the performance of those duties (paragraph 77 of Taxation Ruling TR 95/34).

However, there are situations where it has been accepted that travel by employees between home and work is deductible. Taxation Ruling IT 2543 summarises these situations as follows:

(a) the taxpayer's home constitutes a place of employment/business and travel is between two places of employment/business

(b) the taxpayer's employment can be construed as having commenced before or at the time of leaving home

(c) the taxpayer has to transport by vehicle bulky equipment necessary for employment

(d) the taxpayer's employment is inherently of an itinerant nature, and

(e) the taxpayer is required to break his or her normal journey to perform employment duties (other than incidental duties such as collecting newspapers, mail, etc.) on the way from home to the usual place of employment, or from the place of employment to home.

In your case, situation (e) above may be relevant and is discussed below.

Your home is not considered to be a place of business. You do not deal with your own clients at your home. They will either be dealt with onsite or in the office of the contracting company. The clients you are dealing with are clients of the company and you are performing the work for them. You do complete some work at your home (10-15%) but this does not make it a place of business. You are provided with the necessary facilities at the company's office to complete your work and there is some work that has to be completed there.

The Administrative Tribunal in Crestani v. FC of T 98 ATC 2219; 40 ATR 1037 found the taxpayer's work equipment was sufficiently bulky and cumbersome such that the purpose of the car travel may be attributed to the carriage of that equipment. From the description of the equipment that you need to carry in your ute for onsite work, it is not considered to be bulky equipment. Therefore motor vehicle expenses could not be claimed on the basis of you having to transport by vehicle, bulky equipment necessary for completion of your work.

Motor vehicle expenses are an allowable deduction when you are considered to be travelling on work. That is, the reason for the travel is to actually do the work. On the occasions when you travel from the office to visit clients onsite, using your vehicle, you are considered to be travelling on work. It is an essential part of your work to complete measurements onsite. You have commenced work at the office and are going out to continue that work.

On the occasions when you travel directly from your home to the client's premises to complete onsite work, then later continue to the office, you are again considered to be travelling on work, as the reason for the trip is to complete the work you are being paid for. You are breaking your normal journey to complete contractual duties. These motor vehicle expenses would be deductible.

When you travel from your home to the office you are not considered to be travelling on work. You are not travelling between two places of business or employment. You are travelling to the office to allow you to commence work that will allow you to complete work you will be paid for. The trip is to transport yourself to put you in a position to complete work. These motor vehicle expenses are not considered to be deductible.