Edited version of your private ruling

Authorisation Number: 1012553909925

Ruling

Subject: Deduction for transporting an employees belongings

Question

Are you entitled to a deduction for travel costs incurred in using your motor vehicle to transport an employee's private possessions to and from work?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2014

The scheme commenced on

1 July 2013

Relevant facts

You are the manager and part owner of a business.

The business gave an undertaking when employing the worker that he would be transported to and from work each day.

You use your own vehicle and incur additional expenses to collect the worker between his home and work

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

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 deduction is generally not allowable for the cost of travel between home and work because the expenses are not considered to be incurred in producing assessable income. These expenses are incurred as a consequence of living in one place and working in another and any expenses incurred to enable a taxpayer to commence their income earning activities are therefore considered private in nature.

The case of Lunney v. Commissioner of Taxation ALR 225;1958 - 0311H - HCA;100 CLR 478;(1958) 11 ATD 404;(1958) 32 ALJR 139 settled the principle that travel to and from work is ordinarily not deductible. This travel is considered to be of an essentially private or domestic nature.

However, there are situations where it has been accepted that travel by employees from home to work is deductible. One of these situations is if the employee has to transport by vehicle bulky equipment necessary for employment.

Sciberras and Commissioner of Taxation AATA 509 considered the matter of a fuel tanker driver who carried manuals, tools and gear in addition to personal protective equipment which he claimed were necessary for his work as a driver.

The case addressed the issue of whether the equipment transported by the taxpayer was necessary for their employment. It was found that the equipment had to be:

(a) An integral part of the income-earning activity;

(b) Essential to the performance of the work;

(c) The expense is incurred as the only practical means of transporting it; and

(d) There is no secure alternative to transporting it.

Application to your circumstances

It is acknowledged that you are carrying the employee and private items to and from his home to work, and although they do not belong to you these items belonging to the worker would be considered to be personal items.

It is considered that the carriage of personal items, are not of the same character as the transportation of essential tools of trade and your decision to transport these items is private in nature. It is considered that it was your personal choice to carry these items for the worker.

Therefore, after giving consideration to the principles noted above, you are not allowed a deduction for your car expenses under 8-1 of the ITAA 1997.