Edited version of your private ruling

Authorisation Number: 1012501209765

Ruling

Subject: Travel expenses

Question

Are you entitled to a deduction for your accommodation and travel expenses?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2011

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You were required to travel interstate for different jobs.

You worked on a short-term temporary contract with Company A.

You travelled from your home in City A to City B for this work in your own vehicle and arranged your own accommodation.

You were not reimbursed by the company for travel or accommodation.

You also worked for Company B in City C for a short period on a casual contract.

You travelled from City A to City C return by air.

No reimbursements were provided by Company B.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Summary

You are not entitled to a deduction for the expenses you will incur as they are incurred in order to put you in a position to be able to earn income but are not incurred in the actual course of gaining or producing that income.

Detailed reasoning

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 and costs of travelling between home and work 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.

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. He claimed the costs of maintaining his caravan and other living expenses such as the cost of heating and lighting. The Federal Court considered that the caravan was rendered necessary as much by the taxpayer's choice of the place of his residence in Grafton as by his choice of employment in the forest, and its purpose was to enable him to retain his residence at Grafton although employed in the forest. It was held that the expenses incurred in relation to the temporary accommodation near the workplace while maintaining a family residence in another location were dictated not by his work but by private considerations, and therefore were not deductible.

In the case Federal Commissioner of Taxation v. Charlton 84 ATC 4415; (1984) 15 ATR 711, the taxpayer was a pathologist employed to carry out autopsies for the local coroner in Bendigo. He rented a flat in Bendigo while maintaining a permanent family home in Melbourne, located approximately 150kms away. There was evidence that there was difficulty in finding motel accommodation in Bendigo and the taxpayer was reluctant to make the round trip back to Melbourne without rest.  The taxpayer claimed that the rental expenses were incurred in the production of assessable income. 

Justice Crockett of the Supreme Court of Victoria allowed the Commissioner's appeal and ruled:   

The Commissioner contends (correctly in my view) that, if the taxpayer should choose to reside so far from the place where it is necessary for him to be in order to gain his income that he, not only needs to incur expense in travelling to that place but, also to incur expense in the provision to him of some accommodation transitory or discontinuous in its use and secondary to or temporarily supplemental of his actual home, then that expense, too, is for the same reason non-deductible.

The taxpayer's election to live in Melbourne and not in Bendigo meant that the rental expended on the flat in order to enable him to secure accommodation in which to recuperate from the rigours of travel and the nature of his work was an expenditure dictated not by his work but by private considerations. 

In your case, you incurred expenses for accommodation and travel due to having your home in one city and your employment in another city. Whilst the expenses would not be incurred but for the distance of your work place from your home, the expenses are a prerequisite to the earning of assessable income. That is, they are incurred in order to put you in a position to be able to earn income but are not incurred in the actual course of gaining or producing that income. Also, the expenses are considered to be private in nature as they are incurred due to your choice of where you live and where you work.

A deduction is therefore not allowable for your accommodation and travel expenses.