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Ruling

Subject: Deduction for travel expenses

Question

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

Answer

No

This ruling applies for the following period

Year ended 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts and circumstances

You are employed to travel interstate and the duration of your trips is several days.

You transport items from your home to start work:

Your employer supplies you with their accommodation and motel accommodation for you to use.

You are paid a meal allowance by your employer.

There are no suitable storage facilities provided by your employer.

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. One of these situations is if the employee has to transport by vehicle bulky equipment necessary for employment.

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.

The Administrative Appeals Tribunal in Crestani v. FC of T 98 ATC 2219; 40 ATR 1037 found an aircraft engineer's tools to be bulky and it was a requirement that he had the tools with him at the workplace each day.

Sciberras and Commissioner of Taxation [2011] AATA 509 (Sciberras' Case) addressed the issue of whether the equipment transported by the taxpayer was necessary for their employment.

The case considered the matter of a fuel tanker driver who carried manuals, tools and gear in addition to personal protective equipment which he claimed were necessary for his work as a driver.

In Sciberra's Case Senior Member Letcher stated:

A common thread in the cases where an exception to the general rule is found to exist is that the equipment is an essential part of the work being specialist tools suited to the task or items intrinsically involved in the work. In the case, Senior Member the tools, clothing and manuals were not essentials used in the driving work, nor were they items without which the work could not be done, nor were they required by the contract of employment or provision of law.

The relevant exception to the general principle may be stated as follows (in the case of transport equipment) and satisfied if:

(a) It is an integral part of the income-earning activity;

(b) It is essential to the performance of the work;

(c) The expense is incurred as the only practical means of transporting it; and

(d) There is no secure alternative to transporting it.

Each of the above criteria must be satisfied.

In Case 43/94 94 ATC 387 a flight sergeant with the Royal Australian Air Force was denied a deduction for the cost of transporting his flying suit and other items including charts, work manuals and study materials used for work purposes. It was considered that the duffle bag was not of sufficient size or weight to impede facile transport. It was held that the mode of transporting the items was simply a consequence of the means adopted by the taxpayer to convey him to work.

The question of what constitutes bulky equipment and whether or not the goods transported are necessary for employment must be considered according to the individual circumstances in each case.

Application to your circumstances

It is acknowledged that you carrying numerous items with you to and from home, some of these items such as work manuals are work related, however others such as your meals, cooking utensils, bedding and personal clothing are considered to be personal items.

It is considered that the carriage of personal items which are essentially used by you to provide for your comfort and sustenance, do not have the same character as the transportation of essential tools of trade. Those items are not 'specialist tools suited to the task or items intrinsically involved in the works' and therefore are not included in the exception to the general rule that travel between home and work is private in nature.

You carry both work equipment and personal items between your home and your workplace; similar to Case 43/94, we consider the work equipment when separated from your personal effects is not considered to be of a size or weight that would make their transportation difficult.

Thus, the equipment carried is not considered to be of such bulk that it would change the primary purpose of your travel from one of transporting yourself to and from work to one of transporting the equipment. Also, the lack of secure storage at your work is not sufficient consideration, as a deduction is only allowable when it is established the tools or equipment are bulky.

Therefore, after giving consideration to the principles noted above, you are not allowed a deduction for your car expenses under 8-1 of the ITAA 1997 for carrying your work equipment and personal belongings from home to work.