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Ruling
Subject: Rental expenses
Question
Are you entitled to a deduction for the cost of your rental expenses for your on site accommodation?
Answer
No
This ruling applies for the following period
Year ended 30 June 2012
The scheme commenced on
1 July 2011
Relevant facts
You are required by your employer to reside in a multi tenanted building in which you are employed.
You are required to be on 24 hour call and available by your employer in order to supply support/assistance to the tenants of the building.
You have had to vacate your own residence in order to meet your contractual obligation to live on site.
You have leased out your residence.
Your spouse lives with you on site.
You have incurred rental expenses to live on site.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
Summary
You are not entitled to a deduction for the cost of your accommodation where you work as it is considered to be a private expense.
Detailed reasoning
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.
As a general rule, the cost of accommodation is not tax deductible, as it is essentially a living expense which is considered to be a private or domestic outgoing (Federal Commissioner of Taxation v. Green (1950) 81 CLR 313; (1950) 9 ATD 142; (1950) 4 AITR 471).
However, where a taxpayer is required by his or her employer to reside for periods of time, away from home and at the work site, and that employee incurs expenditure for the cost of sustenance, the expense takes on the character being business or employment related (Roads and Traffic Authority of NSW v FC of T 93 ATC 4508;(1993) 26 ATC 76).
In your case, you live with your spouse in rented accommodation in the building where you work. You have no other home that you are maintaining as you have leased out your home and so you are not travelling away from home. You have established a home at the tenanted building where you work.
Even though it is a requirement as part of your employment agreement that you live on site, the essential character of the expenditure is of a private or domestic nature. The accommodation expenses are a prerequisite to the earning of your assessable income and are not expenses incurred in the course of gaining or producing income.
Therefore, you are not entitled to a deduction for your accommodation expenses under section 8-1 of the ITAA 1997.