Edited version of your private ruling

Authorisation Number: 1012582310498

Ruling

Subject: Travel expenses

Question 1

Are you entitled to a deduction for your accommodation, meals and incidental expenses?

Answer

No.

Question 2

Are you entitled to a deduction for laundry costs where you have kept a written record of the expense?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 2013

The scheme commences on:

1 July 2012

Relevant facts and circumstances

You are an employee.

You live in City A but work in City B.

You travel to City B where during your days of work you stay at a place of accommodation.

You travel from the place of accommodation to the worksite daily.

You are paid a travel allowance for travel to and from the place of accommodation and worksite and for travel from your place of residence to City B and back.

You are provided a vehicle for your travel.

You are provided accommodation at the place of accommodation at no cost to you.

You are mostly provided meals at the place of accommodation at no cost to you.

You incur incidental expenses as a result of your travels.

You use the Laundromat at the place of accommodation.

The Laundromat does not provide receipts for the cost of using the machines.

You wash your high-visibility clothing.

You only wash work-related clothing.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 900-125

Reasons for decision

Summary

You are not entitled to a deduction for the accommodation, travel and incidental expenses you will incur as 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.

You are entitled to a deduction for your laundry expenses provided you have written evidence of the expense. Where receipts are not provided, you must have kept a written record of each expense.

Detailed reasoning

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 and meal expenses and costs of travelling between home and work 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. The Federal Court considered that the caravan was rendered necessary as much by the taxpayer's choice of the place of his residence in Grafton as by his choice of employment in the forest, and its purpose was to enable him to retain his residence at Grafton although employed in the forest. 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 the case Federal Commissioner of Taxation v. Charlton 84 ATC 4415; (1984) 15 ATR 711, the taxpayer was a pathologist employed to carry out autopsies for the local coroner in Bendigo. He rented a flat in Bendigo while maintaining a permanent family home in Melbourne, located approximately 150kms away. There was evidence that there was difficulty in finding motel accommodation in Bendigo and the taxpayer was reluctant to make the round trip back to Melbourne without rest.  The taxpayer claimed that the rental expenses were incurred in the production of assessable income. 

Justice Crockett of the Supreme Court of Victoria allowed the Commissioner's appeal and ruled:   

The Commissioner contends (correctly in my view) that, if the taxpayer should choose to reside so far from the place where it is necessary for him to be in order to gain his income that he, not only needs to incur expense in travelling to that place but, also to incur expense in the provision to him of some accommodation transitory or discontinuous in its use and secondary to or temporarily supplemental of his actual home, then that expense, too, is for the same reason non-deductible.

The taxpayer's election to live in Melbourne and not in Bendigo meant that the rental expended on the flat in order to enable him to secure accommodation in which to recuperate from the rigours of travel and the nature of his work was an expenditure dictated not by his work but by private considerations. 

In your case, you stay in accommodation close to your workplace while having your home in another city. Whilst any expense incurred would not be incurred but for the distance of your work place from your home, any expense incurred is a prerequisite to the earning of assessable income. That is, it is incurred in order to put you in a position to be able to earn income, but it is not incurred in the actual course of gaining or producing that income. Also, any expense incurred is considered to be private in nature as it is incurred due to your choice of where you live and where you work. While we acknowledge that you receive a travel allowance, the receipt of an allowance does not automatically entitle you to a deduction.

Additionally, you are provided accommodation and meals at no cost to you. As you do not incur these expenses, no deduction is allowable.

Laundry

A deduction is allowable for the cost of washing, drying or ironing clothes that fall into one or more of the following categories:

· Compulsory uniform;

· Non-compulsory uniform;

· Occupation specific clothing; or

· Protective clothing

You must have written evidence, for example, diary entries and receipts, for your laundry expenses if:

· the amount of your claim is greater than $150, and

· your total claim for work expenses exceeds $300 - not including car, meal allowance, award transport payments allowance and travel allowance expenses.

Taxation Ruling TR 97/24 states that relief from substantiation is available where the Commissioner considers it unreasonable to expect a taxpayer to have obtained written evidence of an expense. In these circumstances section 900-130 of the ITAA 1997 allows you to make a record of the expense. These expenses can be recorded using the method specified in section 900-125 of the ITAA 1997.

Section 900-125 of the ITAA 1997 states where each expense is $10 or less, and the total of all your small work expenses, not just laundry expenses, is $200 or less for the year of income, then the individual costs may be recorded in a diary and there is no need to keep receipts.

Alternatively, where written evidence is not held, the Commissioner will allow a claim of $1 per load in situations where only work related clothing is being laundered. If the Commissioner's estimate is used, details of the number of washes that were done during the year should be kept.

In your case, you launder your high-visibility work clothing. High-visibility clothing is considered to be protective clothing and a deduction is allowable for the laundering of these clothes. Therefore, provided you have kept a written record of the expense as outlined above, you are entitled to a deduction for laundry expenses incurred under section 8-1 of the ITAA 1997.