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Edited version of your private ruling
Authorisation Number: 1012522001509
Ruling
Subject: Relocation expenses
Question
Are you entitled to a deduction for relocation 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 transferred from Australia to Country A to work for a company in that country.
Your employer paid all your costs to relocate.
Your contract ended prematurely and you were able to gain employment with an Australian based company.
Neither company was in a position to relocate you back to Australia and the cost to relocate was fully financed by you.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 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.
Taxation Ruling IT 2614 examines the deductibility of relocation expenses. The ruling states that expenses incurred in relocating to take up an appointment with a new or existing employer are not allowable deductions as they are private or domestic in nature. This is so, regardless of whether an allowance has been paid, or if the relocation was involuntary.
Taxation Ruling IT 2481 also discusses this expense. At paragraph 9 the ruling states the expenditure is not incurred in gaining or producing income and is not deductible as the taxpayer is not travelling on work, but to work. This is consistent with the view in the Federal Court case Fullerton v. FC of T 91 ATC 4983; 22 ATR 757 (Fullerton's case).
In Fullerton's case, as a result of a reorganisation, the taxpayer's position ceased to exist. In order to avoid retrenchment, he had no choice but to accept a transfer to a different location. The employer reimbursed a portion of the relocation expenses and the taxpayer claimed the remainder as a tax deduction. It was held that the expenditure on the taxpayer's domestic or family arrangements is not deductible, even though the expenditure had a causal connection with the earning of income. The outgoing was not incurred in the gaining or producing of income, notwithstanding that the relocation was in response to the changing necessities of work.
In your case, you incurred relocation expenses to take up your new position. However the relocation expenses are not incurred in gaining or producing your assessable income. Rather, they are a prerequisite to earning that income. Also, the expenses are of a private nature.
Therefore, you are not entitled to a deduction for the relocation expenses.