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Ruling

Subject: Accommodation and graduation expenses

Question 1

Are you entitled to a deduction for the cost of attending your graduation?

Answer

No.

Question 2

Are you entitled to a deduction for the cost of accommodation close to your job?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts

You attended your graduation.

You relocated to another city and rented accommodation to take up employment.

Your employer did not either provide accommodation or pay you for the cost of your accommodation.

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.

Graduation ceremony

Taxation Ruling TR 98/9 examines the deductibility of self education expenses. Where your income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of self-education enables you to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction.

In Berrett v FC of T 99 ATC 2127; 41 ATR 1262, a taxpayer travelled from Melbourne to Sydney to attend a graduation ceremony. They claimed a deduction for the expenses they incurred for travel, accommodation, hiring academic dress and framing the degree. In denying the deduction, the Senior Member stated:

In my view it is the course of study and the completion of that course which has the requisite nexus with the gaining of assessable income. Whether the applicant attends a presentation ceremony or simply receives his degree certificate in the post will have no impact on his knowledge or ability in carrying out his employment duties nor on his promotion prospects. Consequently the expenditure on travel, accommodation and hire of academic gown is not deductible

In your situation, you will incur expenses relating to attending your graduation ceremony. It is not considered these expenses have the requisite nexus with your income earning activities and you are not entitled to a deduction.

Accommodation

As a general rule, expenditure on accommodation while working away from home is not allowed as a deduction. These costs are essentially 'living expenses' of a private or domestic nature. The fact that income cannot be earned unless certain expenses are necessarily incurred is not determinative of deductibility.

In FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 the Federal Court disallowed a forest worker's deduction for the cost of maintaining a caravan and other living expenses. The taxpayer incurred the expenses in providing temporary accommodation at the base camp because the taxpayer had chosen to reside at a place far from the worksite. These expenses were dictated not by work but by private considerations.

The expense of accommodation close to where you work is considered to be private in nature and is not deductible. Furthermore, the fact that your employer did not pay for your accommodation does not make the expense deductible.