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Ruling

Subject: Deduction for relocation and accommodation expenses

Question

Are you entitled to a deduction for relocation and rental expenses?

Answer

No

This ruling applies for the following period:

Year ended 30 June 2012

The scheme commences on:

1 July 2011

Relevant facts and circumstances

You are employed and you relocated from your current place of employment to another town. You are renting accommodation in this town and you have retained your home in original location.

It is a requirement that you live close to your workplace.

You did not receive financial assistance for the move and do not receive assistance for your rental costs.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Relocation expenses

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.

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.

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.

You have incurred expenses to relocate to take up your new position with the same employer at a new location

However these expenses are not incurred in gaining or producing your assessable income rather, they are a prerequisite to earning that income.

Therefore, you are not entitled to a deduction for the relocation costs and the rental costs under section 8-1 of the ITAA 1997.

Accommodation expenses

Generally, accommodation expenses are private in nature and are not deductible.

As discussed above, certain expenditures are incurred in order to be in a position to be able to derive assessable income, and are not in the course of gaining or producing assessable income.

Your accommodation expenses to live in your new location and to live close your work-place is a prerequisite to the earning of assessable income and are not expenses incurred in the course of gaining or producing that income.

Further, the essential character of the expenditure is of a private or domestic nature as it arises due to the choice of where you live and where you work.

Therefore, you are not entitled to a deduction for the costs incurred for accommodation under section 8-1 of the ITAA 1997.

Conclusion:

Your relocation and accommodation expenses are a prerequisite to the earning of your income. They are of a private nature and are incurred as a necessary consequence of living in a place to earn your income, and are not incurred in gaining or producing your income. You are therefore not entitled to a deduction for these expenses.