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Edited version of your private ruling
Authorisation Number: 1012514838998
Ruling
Subject: Deduction for living away from home expenses
Question 1
Are you entitled to a deduction for food and accommodation expenses incurred while working away from your home?
Answer 1
No
Question 2
Are you considered to be in receipt of Living-Away-From-Home-Allowance?
Answer 2
No
This ruling applies for the following periods:
Year ending 30 June 2013
The scheme commences on:
1 July 2012
Relevant facts and circumstances
You normally live in one state and during the relevant year you worked for an employer in another state where you rented accommodation and incurred living expenses.
Your employer did not pay you a living-away-from home allowance.
Your residence was not rented while you were working interstate.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Fringe Benefits Tax Act 1986 Section 30
Reasons for decision
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 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. 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 your case, you incur expenses for accommodation and meals due to having your home in one town and your employment in another. 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 meal expenses.
Treatment of a living-away-from home allowance
The Fringe Benefits Tax Act 1986 sets out how a living-away-from home allowance (LAFHA) is taxed and there have been no significant changes to how this legislation is applied.
A LAFHA is an allowance paid to an employee to compensate them for additional expenses incurred and other disadvantages suffered, because the employee is required to live away from their usual residence in order to perform their duties for their employer.
Any LAFHA paid to an employee is not treated as assessable income of the employee; rather it is treated as a fringe benefit and is taxed in the hands of the employer.
As explained above, an employee is not eligible to claim an income tax deduction for expenses incurred in relation to accommodation and food while living away from home and this is regardless of whether they are in receipt of a LAFHA.