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Ruling
Subject: Relocation expenses
Question
Are you entitled to a deduction for the cost of relocation?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts
You accepted a five year contract.
Your employer paid for your relocation expenses.
After one and a half years, your employer terminated the contract and you returned back to your former city.
You had to pay for your own expenses to relocate back to your former city.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
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, or relate to the earning of exempt income.
Taxation Ruling IT 2614 examines the deductibility of relocation expenses. The ruling states that expenses incurred in relocating to take up an appointment with a new or existing employer are not allowable deductions as they are private or domestic in nature. This is so, regardless of whether an allowance has been paid, or if the relocation was involuntary.
Taxation Ruling IT 2481 also discusses this expense. At paragraph 9 the ruling states the expenditure is not incurred in gaining or producing income and is not deductible as the taxpayer is not travelling on work, but to work.
In your case, you incurred expenditure in relocating back to your former location after your employment contract was terminated. While we accept that you would not have incurred the expense if you had not been terminated from your position, the expenses still retain their private or domestic nature.
Therefore, you are not entitled to a deduction for the relocation expenses.