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Subject: Motor vehicle expenses

Question 1:

Are you entitled to a deduction for motor vehicle expenses for travel between home and your work when you carry tools necessary to perform your duties?

Answer 1:

No

Question 2:

Are you entitled to a deduction for motor vehicle expenses where you travel from your home to a patient's home and then on to your work place?

Answer 2:

Yes

Question 3:

Are you entitled to a deduction for motor vehicle expenses where you travel from your home to a patient's home and return while you are 'on-call' after hours?

Answer 3:

Yes

Question 4

Are you considered to be an itinerant worker?

Answer 4:

No

This ruling applies for the following periods:

Year ended 30 June 2011

The scheme commences on:

01 July 2010

Relevant facts and circumstances

You are a general medical practitioner and you work for your own company.

Your principal place of business is a medical centre. However, you are also required to be 'on call' after hours.

You see most of your patients at the medical centre, and you are also on-call to make home visits to patients after hours. You are on-call at all times but you are not called out on a daily basis.

When you are called out after hours, you provide an initial consultancy service, and if required, you travel to the patient's home. Due to this requirement of having to travel to a patient's home, it is necessary that you carry a medical bag (for surgical tools) and a medical sharps waste bin in your vehicle at all times. You state that the medical bag and waste bin are not bulky or heavy equipment.

The types of travel include:

· from your home to work and work to your home

· from your home to a patient's home and return

· from your home to a patient's home and then to your workplace.

Your vehicle is used solely for the purposes listed above.

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.

Generally, a deduction is not allowable for the cost of travel between home and work as this travel is considered to be of a private or domestic nature. These expenses are incurred as a consequence of living in one place and working in another.

In Lunney v. FC of T (1958) 100 CLR 478 (Lunney's Case) the Full High Court laid down the principle that for a deduction to be allowable it is not enough for the expenditure to be an essential prerequisite to the derivation of assessable income. In that case it was held that the costs incurred by a taxpayer in travelling to the place where they work are expenses incurred in order to enable them to earn income but are not expenses incurred in the course of earning that income.

However, there are some situations where it has been accepted that travel from home to work is deductible.

These include where:

· the home constitutes a place of employment and travel is to a workplace to continue work.

· the employment is inherently of an itinerant nature

· the taxpayer has to transport by vehicle bulky equipment necessary for employment.

Your equipment is not bulky. Therefore we will consider the other 2 situations.

Home constitutes a place of employment

In your case, your home does not constitute a place of employment as you only perform ad-hoc work related duties at your home, when an after hours call arises. However, where a taxpayer is 'on call' after ordinary hours they may be allowed a deduction for the cost of travel between home and a place of work.

Taxation Ruling IT 112 provides that deductions will be allowed in cases where, for example, a medical practitioner who holds an appointment at a hospital is required to be on call and accessible by phone to cope with emergency cases and who gives medical instructions over the phone prior to leaving home to travel to the hospital. In this situation, it could be considered that his responsibility for the patient begins at home and therefore he commenced his income earning activity at home on receiving the call. As such, the cost of travel to and from the hospital would be considered a deductible expense.

In your case, the travel undertaken between your home and your patient's home, while 'on call' after ordinary hours is considered similar to the above situation and therefore incurred in producing your assessable income. Accordingly, the costs incurred for this travel is a deductible expense under section 8-1 of the ITAA 1997.

Work of an itinerant nature

Where an employee is involved in itinerant work they are able to claim the cost of travel from their home to all work sites and then back home again (paragraph 10 of Taxation Ruling 95/34). A work site is the place at which an employee is employed as opposed to a place where an employee performs employment duties.

Income Tax Ruling TR 95/34 addresses itinerant work and outlines a variety of characteristics that will indicate that a taxpayer's employment is of this nature. The following characteristics are derived from TR 95/34:

(a) travel is a fundamental aspect of the taxpayer's employment.

(b) the taxpayer travels to a 'web' of work places.

(c) there is continual travel from one workplace to another.

(d) other factors:

· there is a degree of uncertainty as to where the taxpayer will be required to work.

· the taxpayer's home constitutes a base of operation.

· the taxpayer is provided with an allowance from his employer in relation to any travel that is undertaken.

Each factor in itself is not a determinant of whether the employment can be regarded as being itinerant. To conclude that the employment is itinerant requires that several of the above characteristics are satisfied.

(a) Travel is a fundamental aspect of the employment.

In order for a taxpayer's employment to be regarded as being itinerant, travel must be an essential feature of the taxpayer's duties.

In FC of T v Weiner 78 ATC 4006 (Weiner's case) a school teacher was required to visit and teach at a minimum of four different schools each day. The court concluded that the travel was a fundamental aspect of her employment because she was required to travel to several different work locations each day as a normal part of her duties. A deduction was allowed because the travel was directly incurred for the purpose of gaining her assessable income.

In handing down the decision Justice Smith stated, with reference to the original Board of Review decision which allowed the deduction, at page 4010: ' ...that travel was a fundamental part of the taxpayer's work, is not open to challenge. Viewed objectively, it does not seem to me to be open to question that the taxpayer would not have been able to perform her duties without the use of her motor vehicle...The nature of the job itself made travel in the performance of her duties essential and it was a necessary element of the employment that on those working days transport be available.'

However, even though travel is deemed to be an essential feature of the employee's work, this fact alone does not automatically imply that the employment is itinerant.

There are occasions when your employment requires you to undertake travel when you are on-call and visiting patients at their home. However, it can not be said that this travel forms a fundamental part of your employment.

(b) The taxpayer is required to travel to a 'web' of work sites

If a taxpayer performs his employment duties at several work sites each day they are held to be deriving income at each of these sites. Therefore, any travel undertaken to reach each site has the character of being an expense incurred to gain assessable income.

According to subparagraph 7(b) of TR 95/34, the 'web' of work places must form the employee's regular place of employment. The wording of TR 95/34 requires that, for a 'web' of workplaces to exist, the employee must be separately employed at each work site to which he travels.

This was the situation in Weiner's case. The school teacher was treated as travelling to a 'web' of work sites because:

· she was separately employed at four different schools

· she did not have an office or other fixed place of employment to carry out her work.

The existence of a fixed place of employment will preclude a finding that a taxpayer travels within a 'web' of work places.

You are employed by your company where you work at a medical centre. This is regarded as your fixed place of employment, notwithstanding that you also carry out work at patients' premises. Although you travel to patients' premises you do not normally travel between patients' premises and therefore travel to the patients' premises does not constitute a 'web' of work sites.

(c) There is continual travel from one work site to another.

According to paragraph 37 of TR 95/34, continuous travel refers to the frequency with which an employee travels from one site to another. This was the situation in Weiner's case.

Weiner's case can be contrasted to FC of T v Genys 87 ATC 4875 (Genys' case).

In Genys' case, a registered nurse was disallowed a deduction for the cost of travelling from her home to different work sites. The nurse was registered with an employment agency which would contact her, sometimes at short notice, to undertake work at a specified hospital, the taxpayer would stay at this hospital until her duties ceased. The taxpayer claimed the cost of travel from her home to the relevant hospital.

The Federal Court held that the deduction was not allowed. In his judgment Justice Northrop stated at page 4,882:

' the taxpayer's employment cannot be treated as - itinerant - ... the taxpayer does not travel between two places of work after the commencement of her duties; she simply travels from home to work and back again.'

Some important factors that lead to the decision were that:

· the taxpayer did not actually commence her duties until she arrived at the hospital.

· travel was not a fundamental aspect of the employment because she only travelled from home to one hospital and then back home again.

You have a fixed place of employment at the medical centre. In your case after you arrive at the centre you may be required to travel to visit patients at their home. Because the patient's home is not a work site it can not be said that you are undertaking continuous travel between work sites.

As stated above you do not continually travel for work going from one worksite to another, your place of employment is the medical centre.

(d) Other factors

The medical centre is your regular place of work which gives your employment a degree of stability and certainty because you know where you will need to carry out your duties.

On balance, it is not accepted that you are engaged in itinerant employment because:

· Travel is not necessarily a fundamental aspect of your employment.

· You do not travel within a 'web' of work sites each day.

· There is no requirement for you to continuously travel between work sites.

· There is a level of certainty as to where you will be working.

· You are not carrying on a business from your home.