Edited version of your private ruling

Authorisation Number: 1012507190329

Ruling

Subject: travel expenses

Question 1

Are you entitled to a deduction for expenses in travelling between home and the place A?

Answer

No.

Question 2

Are you entitled to a deduction for expenses in travelling between home and place B?

Answer

No.

Question 3

Are you entitled to a deduction for expenses in travelling between place A and place B?

Answer

No.

Question 4

Are you entitled to a deduction for expenses in travelling to and from alternative work places?

Answer

Yes.

Question 5

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

Answer

No.

This ruling applies for the following periods

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commenced on

1 July 2009

Relevant facts

You have a continuous position at place B with entity B. Under this position you do not receive a wage but have access to some funds for your work.

At place B you have conditions open to traditionally salaried staff such as an allocated office space.

You also started a full time contract at place A.

As you live in city C, it was agreed that you would attend the place A every week on two consecutive days staying overnight in city A. You have access to an office at place A. You were permitted to do the remainder of your work in city C, either at your home office or at your place B workspace. You sometimes incur accommodation and meal expenses when working in city A. Other times you stay with a friend and avoid accommodation expenses.

You generally use public transport when travelling to city A for work. You attend place A on two days most weeks unless you are working interstate or overseas.

Sometimes you travel directly from place A to place B, but generally you travel from home to place A.

As part of your place A position, you also travel to other places for meetings and other work requirements.

You do not carry bulky equipment when travelling to and from work.

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.

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).

A deduction is only allowable if an expense:

· is actually incurred,

· meets the deductibility tests, and

· satisfies the substantiation rules.

Home to work travel expenses

Generally a deduction is not allowable for the cost of travel between home and a normal place of 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.

In your case, you work from home, at place A and at place B. Place A is a regular and normal place of employment for you and is not regarded as an alternative place of work (refer below).

The Commissioner accepts that expenses incurred in travelling between home and work may be deductible in 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 and have therefore not been addressed.

As highlighted above, the cost of travel between home and work is generally incurred to put a person in a position to perform duties, rather than in the performance of those duties (Taxation Rulings IT 2543 and IT 112).

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 may not always incur accommodation expenses in city A, the principles in the above case remain relevant in your circumstances.

Your travel between home and place A is not travelling on work, but rather travelling to and from work. Place A is a normal place of work for you. While it is acknowledged that your usual home is in city C, and you have a work office at your home, the travel between city C and city A is not work related travel. Rather it is private travel carried out to enable you to commence your employment duties. The distance of the travel does not alter the private nature of the travel. Also the fact that you may work from home before you leave home does not change the nature of the travel.

The travel expenses to and from place A are a prerequisite to the earning of assessable income and are not incurred in the actual performance of your work. Therefore, the associated travel expenses are not an allowable deduction under section 8-1 of the ITAA 1997. Furthermore, section 25-100 specifically denies a deduction.

Your specific circumstances are acknowledged, however even though place B and your home have been approved by entity A to use for your work related activities, travel between home and/or place A and/or place B is not an allowable deduction.

Travel directly between place A and B is also not regarded as deductible travel. Under section 25-100 of the ITAA 1997, deductible travel between workplaces requires that you are engaged in activities to gain or produce your assessable income at both workplaces. As you do not earn assessable income from your place B contract, any travel to and from place B is not sufficiently related to your income earning activities and no deduction is allowable. Furthermore the travel is regarded as private in nature.

Travel to an alternative work place

A deduction is generally allowable for the cost of travelling to and from an alternative workplace. For example, travel to and from place D for meetings or work related purposes is an allowable deduction. As highlighted in paragraph 34 of Miscellaneous Taxation Ruling MT 2027, an alternative destination is not a regular place of employment.

In your case travel to and from place D or other places for one off meetings is regarded as deductible work travel. Therefore where you travel directly to place D either from home or from place A or place B, this travel is deductible. Similarly, the cost of the return trip is also an allowable deduction.

Accommodation and meal expenses

Expenditure on the daily necessities of life (for example, accommodation, 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. However, no deduction is allowable if a taxpayer is merely maintaining accommodation close to their usual work location for convenience.

Your situation is comparable to Toms’ case. In your case you sometimes incur accommodation and meal expenses when in city A for work. We acknowledge the distance travelled, however, your accommodation and meal expenses are incurred to put you in a place where you are closer to your place of employment. Place A is your normal place of work. The accommodation and meal expenses incurred are not related to the actual performance of your duties. They are more a convenience and a prerequisite to the earning of assessable income and are not expenses incurred in the course of gaining or producing that income. Furthermore, the essential character of the expense is of a private or domestic nature. Accordingly, you are not entitled to a deduction for the accommodation or meal expenses under section 8-1 of the ITAA 1997.