Edited version of your private ruling

Authorisation Number: 1012476869595

Ruling

Subject: Work related expenses - motor vehicle expense

Question 1

Are you entitled to claim a deduction for work related car expenses as an itinerant worker?

Answer

Yes

Question 2

Are you entitled to claim a deduction for the work related portion of car expenses such as servicing and repairs, insurance and registration using the log book method?

Answer

Yes

Question 3

Are you entitled to claim a deduction for the work related portion of the costs of phone calls, computer, internet usage and fax communications with my employer?

Answer

Yes

This ruling applies for the following periods:

Year ending 30 June 2013

The scheme commences on:

1 July 2012

Relevant facts and circumstances

You are employed.

Your employment consists of attending various locations to complete your employment duties.

You drive a car, which is registered in your name.

You have kept a log book for the whole financial year

Your business use kilometres will be greater than 5000 km for this financial year.

You do not have a fixed place of work.

You communicate with your employers by phone, email or fax.

You receive your timesheets from your employer via email which advises the locations in which you are required to work for the following week.

Your completed timesheets are faxed to your employer.

You travel from your home to your first location and between locations during the day before returning home.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1 

Income Tax Assessment Act 1997 Division 28

Income Tax Assessment Act 1997 section 28-12

Income Tax Assessment Act 1997 subsection 28-13(1)

Income Tax Assessment Act 1997 Division 900

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 deals with general deductions and allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income, except to the extent that they are outgoings of a capital, private or domestic nature.

Generally a deduction is not allowable for the cost of travel between home and work as it is considered a private expense. However, a deduction may be allowable for the cost of travel between home and work for an employee who is engaged in itinerant work. Taxation Ruling TR 95/34 provides guidelines for establishing whether an employee is carrying out itinerant work.

As per TR 95/34, the following characteristics have emerged from cases as being indicators of itinerancy: 

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

· the existence of a 'web' of work places in the employee's regular employment, that is, the employee has no fixed place of work

· the employee continually travels from one worksite to another. An employee must regularly work at more than one worksite before returning to his or her usual place of residence, and

· the employee has a degree of uncertainty of location in his or her employment (that is, no long-term plan and no regular pattern exists).

It should be noted that the above characteristics are not exhaustive and no single factor on its own is necessarily decisive. The question of whether an employee's work is itinerant is one of fact, to be determined according to individual circumstances.

In your case, it is considered that travel is a fundamental part of your work; you regularly attend various workplaces to carry out your duties, there is no single 'workplace' which could be considered your fixed place of work. You are advised by your employer via email which locations you need to attend the next week. Given these facts we consider there is a degree of uncertainty of location as there is no regular pattern of worksites you are required to attend. Therefore, it is considered you are engaged in itinerant work and the cost of travel from home to your work locations is deductible under section 8-1 of the ITAA 1997.

Question 2

Work related car expenses are deductible under section 28-12 of the Income Tax Assessment Act 1997 (ITAA 1997) using one of the four methods set out in Division 28 of the ITAA 1997.

These methods are:

· cents per kilometre method

· 12% of original value

· One-third of actual expense, or

· Logbook method

You have indicated that you will be using the logbook method to calculate your motor vehicle expenses. To use this method you must:

· hold the vehicle - that is, own or lease the vehicle;

· keep a logbook for a minimum of 12 continuous weeks;

· determine the number of business related kilometres travelled as a percentage of total kilometres travelled;

· calculate your deduction by multiplying the amount of each eligible car expense by the business use percentage;

· retain receipts to substantiate your car expenses (fuel and oil costs can be estimated); and

· record and retain the vehicles odometer readings at the start and end of each year.

A car expense is a loss or outgoing to do with a car (subsection 28-13(1) of the ITAA 1997). Expenses include running costs and decline in value but not capital costs. Car expenses can include servicing and repairs, insurance premiums, registration and fuel and oil costs.

The following steps are required to calculate your work related car expense deduction amount using the logbook method:

Step one

Work out the total kilometres travelled during the logbook period and how many of these were business kilometres. Divide the business kilometres by the total kilometres travelled. This is your business use percentage.

Step two

Add up your total expenses. These expenses include running costs and decline in value, but not capital costs.

Step three

Multiply your total expenses by your business use percentage. This will give you the amount of your work related car expense deduction for the financial year.

Question 3

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.

You are required to perform some work related administrative activities from your home which requires the use of your home computer and internet, your phone and fax. These activities include receiving your time sheet via email, faxing your completed timesheet to your employer and calling your employer when required.

As the expenses directly relate to your employment, you are entitled to a deduction for the work related portion of the internet fees, phone calls and fax costs incurred under section 8-1 of the ITAA 1997. Please note that any establishment costs and/or application fee you may have incurred for the internet connection is considered capital in nature, and is not an allowable deduction.

Substantiation

Division 900 of the ITAA 1997 states the substantiation requirements in relation to internet use.

A diary record covering a representative four week period must be kept to show the nature of each use (income producing purpose or private use) and the period of time used. From this, a reasonable estimate of work related internet use can be established for apportioning the deduction.