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Ruling

Subject: Deduction for travel expenses

Question 1:

Are you entitled to a deduction for travel expenses between home and work?

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 in the transport industry and your work involves long haul delivery of goods.

Each shift can vary in length and you have mandatory breaks before commencing your shift and also a break before making the return trip after making your delivery.

You consider yourself to be an itinerant worker because of the uncertainty of the length of your shifts and the extra tasks you may be asked to do.

At your work depot you have access to a locker. These lockers can be locked and are situated in a building that is not separately secured. You choose not to use a locker.

When working you take a change of clothes, toiletries and wet weather clothing with you. You also take food and drink for consumption during your shift in a food cooler with ice blocks.

You carry two work manuals weighting 3 to 4 kilograms (kg). They are for different work instructions. You are not required to carry them and copies are not provided by your employer. You carry them so you can refer to them when needed and they give you peace of mind as you are responsible for the correct operation and safety of your form of transport. You also carry a torch.

All the items that you take with you weigh 23 to 25 kg in total.

You transport this equipment between your home and the work depot

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.

A deduction is generally not allowable for the cost of travel between home and work because the expenses are not considered to be incurred in producing assessable income. These expenses are incurred as a consequence of living in one place and working in another and any expenses incurred to enable a taxpayer to commence their income earning activities are therefore considered private in nature.

The case of Lunney v. Commissioner of Taxation [1958] ALR 225;1958 - 0311H - HCA;100 CLR 478;(1958) 11 ATD 404;(1958) 32 ALJR 139 settled the principle that travel to and from work is ordinarily not deductible. This travel is considered to be of an essentially private or domestic nature.

However there are situations where it has been accepted that travel by employees from home to work is deductible:

· the employees home constitutes a place of employment and travel to a work place to continue work

· the employees employment is inherently of an itinerant nature

· travel is between two places of employment, and

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

In your case, the relevant circumstances to be considered are you an itinerant worker and do you have bulky goods necessary for your employment to carry to work.

Itinerant Worker

The Act does not provide a definition of the word 'itinerant'. In the absence of a statutory definition, we must look to the ordinary usage of the word. The Macquarie Dictionary defines 'itinerant' as 'travelling from place to place' or 'one who travels from place to place especially for duty or business'.

In FC of T v. Genys (1987) 17 FCR 495; 87 ATC 4875; (1987) 19 ATR 356 ( Genys case), the Federal Court held that the taxpayer's employment was not itinerant. The taxpayer was a registered nurse who used an employment agency to seek relief work with various hospitals. She was not continuously employed by any one hospital. When a hospital was in need of additional staff they contacted the agency which would then contact the taxpayer. It was integral to the decision in this case that the taxpayer did not travel after the commencement of her duties. She merely travelled to work and home again. Northrop J (FCR at 498; ATC at 4879; ATR at 359) described itinerant as 'shifting places of work' '...where the taxpayer travels between home and shifting places of work, that is, an itinerant occupation.'

Taxation Ruling TR95/34 sets out the following elements which are characteristic of itinerant employment:

· Travel is a fundamental part of the employee's work

· 'Web' of work places - employee has no fixed place of work

· Continual travel from one work site to another

· Uncertainty of location

In your case, you are not considered to be an itinerant worker, although you travel for work, your work arrangements do not have any of the other characteristics attributable to itinerant work.

Bulky Equipment

There is no definition in the taxation legislation of bulky for the purposes of considering the transportation of equipment between home and work. Therefore courts have considered whether a deduction for the cost of travel between home and work may be allowable as a deduction if a taxpayer is required to carry bulky equipment (Federal Commissioner of Taxation v Vogt [1975] 1 NSWLR 194; 5 ATR 274; 75 ATC 4073).

The principle was further clarified in Case U107 (1987) 18 ATR 3544; 87 ATC 650. In this case, there was a single place of employment with storage facilities provided at the place of work. The taxpayer chose to take his tools home with him each day, as the storage facilities were not secure. The Administrative Appeals Tribunal (AAT) confirmed the principle in Vogt's Case applied in these circumstances. It noted that the following factors should be considered in transportation of tools cases:

· security of the storage facilities

· the taxpayer's personal choice to carry the tools (is there a reasonable alternative), and

· the size and weight of the tools and alternative forms of transportation.

These tests have been applied in a number of subsequent cases: Case Z22 92 ATC 230; 23 ATR 1189, Case 43/94 (1994) 29 ATR 1031; 94 ATC 387 (Case 43/94), Crestani v. Federal Commissioner of Taxation (1998) 40 ATR 1037; 98 ATC 2219 (Crestani's case), Bajjada v. Commissioner of Taxation [1999] AATA 519, and Millgate v. Commissioner of Taxation [2000] AATA 1040.

In each of these cases, the security of the workplace storage facilities (when it was established the tools were bulky) was the determinative factor. Where there was concern over the safety of the tools in the workplace facility, the deduction was allowed. Where a secure environment was provided (and this did not mean impregnable), the deduction was not allowed.

It is acknowledged that carrying your manuals and torch is a personal choice as it is not a requirement of your employer to have then with you at all times and that you choose not to use the storage facilities at work and take your equipment home with you.

In Crestani's case, it was held that an aircraft maintenance engineer was entitled to claim his travel expenses in transporting his tools from his home to work. The toolbox in question measured (approximately) 562mm by 250mm by 262mm and weighed approximately 27kg. It was not easy to lift, and could not, in the opinion of the Administrative Appeals Tribunal, conveniently be carried for any distance. The Administrative Appeals Tribunal in Crestani's case also emphasised volume and cumbersomeness as being of as much importance as weight in deciding whether tools are bulky. The transport cost was attributable to the transportation of such bulky equipment rather than private travel between home and work. Also, the employer did not provide a secure storage area for the toolbox. It should also be noted that in Crestani's case it was a requirement that he had the tools with him at the workplace each day.

Your circumstances can be distinguished from Crestani's case as your employer supplies a secure place to lock up your equipment at your place of employment, you are not required to take the manuals with you on each trip but take them as a matter of convenience and we consider what you carry is not sufficiently cumbersome or heavy to be considered bulky.

Therefore, you are not entitled to a deduction for car expenses for travel between home and work under section 8-1 of the ITAA 1997.