Edited version of your private ruling

Authorisation Number: 1012466369013

Ruling

Subject: Travel and meal expenses

Question 1

Are you entitled to a deduction for expenses in travelling between your home and work?

Answer

No.

Question 2

Are you entitled to a deduction for meal expenses?

Answer

No.

Question 3

Are you entitled to a deduction for the electricity and gas expenses incurred in town B?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

1 July 2012

Relevant facts

You are a professional.

You ordinarily reside in city A.

You are contracted to work in town B, which is more than 100 km from city A.

You are required to work at town B during the week.

During the week you reside in provided accommodation in town B. There is no home office in this accommodation.

You travel to town B in your own motor vehicle which can then be used to visit clients and attend other work functions during your stay in town B.

You carry some work equipment and luggage in the vehicle. The equipment is not considered to be bulky or cumbersome.

You provide your own meals and pay for the utility costs such as electricity and gas while you reside in town B.

You do not receive any travel allowance nor have any costs reimbursed.

At the end of the week you return to city A for the weekend.

While in city A, the work place in town B is available for others to use.

During the weekend you work in your home office completing book work and attending to work related matters.

The home office is set aside for your work duties. Clients do not visit your home office.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 25-100

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, or a provision prevents you from deducting it.

A number of significant court decisions have determined that for an expense to be an allowable deduction:

§ it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense (Lunney v. FC of T; (1958) 100 CLR 478 (Lunneys case)), 

§ there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income (Ronpibon Tin NL v. FC of T, (1949) 78 CLR 47), and

§ it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income (Charles Moore Co (WA) Pty Ltd v. FC of T, (1956) 95 CLR 344; FC of T v. Hatchett, 71 ATC 4184).

Travel expenses

Generally a deduction is not allowable for the cost of travel between home and work as it is considered a private expense. Expenditure incurred in travelling to work is a prerequisite to the earning of assessable income rather than being incurred in the course of producing that income. Such expenses are incurred as a consequence of living in one place and working in another. That is, the essential character of the expenditure is of a private or domestic nature, relating to personal and living expenses and therefore not an allowable deduction. (Lunney's case and Federal Commissioner of Taxation v Cooper (1991) 29 FCR 177; 91 ATC 4396; 21 ATR 1616). 

The essentially private character of travel between home and work is not affected by factors such as the mode of transport, the availability of transport, the lack of suitable public transport, the erratic times of employment, the time of travel, the distance of travel and the necessity of travel (Taxation Ruling IT 2543).

Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example, unless a person arrives at work it is not possible to derive income. The income earning duties do not generally commence until the arrival at a place of work and will cease upon departure from work. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income (Case V111 88 ATC 712).

Section 25-100 of the ITAA 1997 allows a deduction for the cost of travelling directly between two workplaces. However, subsection 25-100(3) of the ITAA 1997 states that travel between two places is not travel between workplaces if one of the places you are travelling between is a place at which you reside.

A deduction is not allowable for the cost of travel between home and a person's normal place of work. However, the Commissioner accepts that expenses incurred in travelling between home and work may be deductible in some limited circumstances, for example:

§ the taxpayer's employment is inherently of an itinerant nature, or

§ the taxpayer has to transport by vehicle bulky equipment necessary for employment.

These exceptions do not apply in your circumstances.

In your case, you travel to town B which is your normal place of work. Your travelling expenses are a prerequisite to the earning of assessable income and are not incurred in producing that income.

While it is acknowledged that your usual home is in city A, it is not considered that your travel to and from town B is work related travel. Rather it is private travel carried out to enable you to be closer to the work site and commence your duties. The distance of the travel does not alter the private nature of the travel. Also, the fact that you may do some paper work at your city A home does not change the nature of your travel.

Additionally, subsection 25-100(3) of the ITAA 1997 specifically denies a deduction in your circumstances. Therefore, the associated travel expenses between home and work are not an allowable deduction.

Meal expenses

Expenditure on the daily necessities of life (for example, food and drink) is generally not deductible as it is not incurred in gaining or producing assessable income and is also considered to be private or domestic in nature. Exceptions to this are where you are undertaking work related travel and are required to stay away overnight or you work overtime and receive an overtime meal allowance.

In your case you do not receive an overtime meal allowance.

Also, as highlighted above, your travel is not regarded as work related travel. This is supported by the decision in Federal Commissioner of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466 (Toms case), where the Federal Court held that expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location were not an allowable deduction as they were considered to be private expenses. The Federal Court disallowed the forest workers deduction for the cost of maintaining a caravan and other living expenses. The taxpayer's family home in Grafton was some 108 kilometres from the base camp so he lived in the caravan during the week and returned to the family home on weekends. The caravan was rendered necessary as much by the taxpayer's choice of the place of his residence in Grafton as by his employment in the State forest, and its purpose was to enable him to retain his residence in Grafton although he was employed in the State forest. Had he lived at a town closer to the forest, there is no question the caravan would have been unnecessary.

In your case, although you are not incurring accommodation expenses in town B, the principles in the above case remain relevant in your circumstances. Your situation is similar to Toms case and your travel between home and town B is not incurred in earning your assessable income. As town B is your normal place of work, your meal expenses were not associated with any work related travel. You incurred expenses for meals while living and working in town B. These expenses are not incurred in gaining or producing your assessable income. Rather they are a private expense and no deduction is allowable.

Expenditure on your meals is not deductible, even though the expenditure had a causal connection with the earning of income. Therefore no deduction is allowable under section 8-1 of the ITAA 1997.

Home office expenses

Taxation Ruling TR 93/30 examines the deductibility of home office expenses and in particular, highlights the difference between the home as a place of business and an office or study at home.

A deduction is generally not allowable for the costs associated with a person's home as they are private in nature. However, a taxpayer who carries on part of their income earning activities at home may be entitled to a deduction for part of the outgoings on the home.

TR 93/30 states that home office expenses can be divided into two broad categories - occupancy and running expenses. Occupancy expenses relate to the ownership of a home such as rent, rates and insurance. Running expenses relate to the use of the facilities within the home such as electricity.

In your case, you do not have a home office in your town B accommodation that is used for income producing purposes. The utility expenses incurred for electricity and gas are private expenses. Therefore no deduction is allowed.