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Ruling

Subject: Accommodation expenses

Question

Are you entitled to a deduction for renting accommodation close to your second work location?

Answer

No

This ruling applies for the following period

Year ending 30 June 2013

The scheme commenced on

1 January 2013

Relevant facts

You are employed fulltime in a particular profession.

You live in City A which is your primary residence.

Your work is primarily based in City A where you work a number of days a week.

During the school year you teach at a University in City B, a couple days a week.

While working for the university you are still employed by your first employer.

You generally stay in a hotel on the days you work in City B as City B is a long way from City A, and too far to travel there and back in one day, while also working during the day.

You do not receive any financial assistance or allowances from either employer for travel or 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 outgoings to the extent to which they are incurred in gaining or producing assessable income, or are necessarily incurred in carrying on a business for that purpose. However, a deduction is not allowable for outgoings that are of a capital, private or domestic nature.

Generally, accommodation expenses are private in nature and are not deductible. In Lunney v. FC of T (1958) 100 CLR 478 the Full High Court laid down the principle that for a deduction to be allowable it is not enough for the expenditure to be an essential prerequisite to the derivation of assessable income. In that case it was held that the costs incurred by a taxpayer in travelling to the place where they work are expenses incurred in order to enable them to earn income but are not expenses incurred in the course of earning that income.

Accommodation, meal and incidental expenses are ordinarily not deductible as they are private and domestic in nature.  

An exception is where a taxpayer is travelling in the course of performing their work duties, for example, an interstate truck driver who travels away from home overnight. In these types of cases, the accommodation, meal and incidental expenses incurred while the taxpayer is travelling are incidental to the proper carrying out of their employment function and cease to be of a private and domestic nature.

The issue of expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location was considered in FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 (Toms' Case).

In Toms' Case, the taxpayer was a forest worker who during the working week lived in a caravan in a bush camp 108 kilometres from his family home in Grafton. He claimed it was too far to travel each day to his work in the forest, so that it was necessary to establish a caravan at the camp. He would return home on weekends. The Federal court disallowed a forest's 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 and therefore were not deductible.

In your case, you work at two regular places of employment in City A and City B. You incur expenses for accommodation due to having your home in one city and your employment in another. Whilst the expenses would not be incurred but for the distance of your work place from your family home, the expenses are a prerequisite to the earning of assessable income. They are incurred in order to enable you to earn income but are not incurred in the course of gaining or producing that income.

As you are not travelling in the course of carrying out employment duties, no deduction is available for accommodation expenses you incur when working at the second work location.