Edited version of your private ruling

Authorisation Number: 1012539671242

Ruling

Subject: Deductions - accommodation, meals and incidental expenses

Question

Are you entitled to claim deductions for accommodation, meals and incidentals incurred whilst working at Location X under section 8-1 of the ITAA 1997?

Answer

No.

This ruling applies for the following period:

Income year ending 30 June 2013.

The scheme commences on:

1 July 2012.

Relevant facts and circumstances

You are employed by Company A with your employment undertaken at Location X.

In your role, you are required to work on a roster system and must be on site Monday to Friday, often over 10 hours per day.

Your employment requires you to be away from your home, within close proximity to Location X for the duration of your roster.

Location X is in a remote location, with the closest accommodation available in a town located a short distance away from Location X.

You are paid a travel meal allowance per day, which is paid to employees who are required to stay away from home overnight in accommodation provided by Company A, where the employee provides their own meals.

Amounts for allowances you have been paid have been included in your payslips. One of the allowance you receive is a non-taxable, non-reportable allowance which has not been shown on your Pay As You Go (PAYG) payment summary. Another allowance you receive is not reportable, but is taxable.

You entered into an Annualised Salary Agreement with Company A under which you receive a specified amount of annualised salary per fortnight which comprised of amounts relating to overtime, travel time and incidental expenses.

You have provided a number of documents with your private ruling application, and these documents should be read in conjunction with, and form part of, the private ruling.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Summary

You are not entitled to a deduction for the cost of accommodation, meals and incidentals incurred whilst completing your employment at Location X as they were not incurred in earning your assessable income.

Detailed reasoning

Section 8-1 of the 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.

The cost of meals, accommodation and incidentals are allowable deductions where the taxpayer is travelling away from home in the course of performing their work duties. For example, an office worker attending an interstate conference or an 'on road' salesman could claim deductions for their expenses.

However, no deduction is allowable for these expenses where a taxpayer works at a different location to where they normally live. The place where a taxpayer stays while away from home is considered to be their usual place of residence for that period. These costs are essentially living expenses of a private or domestic nature. The fact that income cannot be earned unless certain expenses are necessarily incurred is not determinative of deductibility.

Court decisions and decisions of the Administrative Appeals Tribunal (AAT)/Board of Review, which provide an independent view as to what effect taxation laws should have, confirm this.

In Case X4 90 ATC 116; AAT Case X4 21 ATR 3120 a specialist radiologist with a practice in a small provincial town over 100 kilometres from a capital city was denied a deduction for the costs of maintaining a house which had been purchased in the city where the taxpayer also had professional obligations. The taxpayer travelled to the city every week. The house was not used for business purposes. The sole purpose of purchasing the house was to provide accommodation while the taxpayer was in the city.

The AAT found that the overall picture was that the taxpayer had created a home away from home. Accordingly it held that the outings were incurred for the purposes of maintaining domestic premises and they did not have any relevant connection with income producing activities. It also held that even if it could be shown that the outgoings were incurred for the purpose of producing assessable income the deductions would be disallowed as outgoings of a private or domestic nature.

This decision endorsed the principle established in Lunney v FC of T 100 CLR 478; 11 ATD 404; [1958] ALR 225 (Lunney's case), that is, prima facie a taxpayer cannot deduct living expenses as they are considered to be private and domestic in nature. To paraphrase what was said in Lunney's case: while a particular expenditure, for example rent, may be a prerequisite to the earning of income that is not to say that the expenditure is incurred in the gaining or producing of that income.

In your case, you have accepted employment which requires you to perform your work duties at Location X, which is located in a remote area. Your home is located some distance away from Location X.

Given the nature of the services to be performed, its length and the fact that the services will be performed at Location X, your place of employment is considered to be Location X. During your period of work at Location X, it is viewed that your accommodation, meals and incidental expenses were incurred by you to enable you to stay in proximity to your place of work, being Location X. These expenses are a prerequisite to the earning of your assessable income and are not expenses incurred in the course of gaining or producing that income. They are living expenses and have been incurred for private and domestic purposes.

Therefore, no deduction is allowable under section 8-1 of the ITAA 1997 for the accommodation, meal and incidental expenses you incurred whilst working at Location X.