Edited version of your private ruling

Authorisation Number: 1012584711764

Ruling

Subject: Work related expenses

Question 1

Are you entitled to a deduction for travel between your home and your work place as an itinerant worker?

Answer

No.

Question 2

Are you entitled to a deduction for accommodation and meals while working away from home?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commences on:

1 July 2011

Relevant facts and circumstances

You are required to work away from your usual place of residence.

You work for a company as a supervisor.

Your employer instructs you to work on projects at different locations depending on the projects undertaken.

Projects are undertaken for several months at a time.

You are responsible for your own transport from your home to the location of the project regardless of the distance.

You have no fixed office location and due to the long term nature of the work you are required to undertake you arrange your own accommodation by way of six month leases and travel back to your home on a regular but not frequent basis.

You are paid an increase in salary to reflect your travel and accommodation expenses.

You incur expenses for travel to each project from your residence, accommodation and meals.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

Summary

Your work is not considered to be itinerant. Therefore, you are not entitled to a deduction for the cost of travel between your home and work site.

You are not entitled to a deduction for accommodation and meals expenses for when you are required to work away from home. These are considered to be private and domestic in nature and are not deductible.

Detailed reasoning

Travel costs

According to section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), you can deduct a loss or outgoing if it is incurred in producing your assessable income except where the outgoing is of a capital, private or domestic nature.

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 (Lunney's Case) settled the principle that travel to and from work is ordinarily not deductible under section 8-1 of the ITAA 1997. This travel is considered to be of an essentially private or domestic nature.

However, a deduction is allowable for the cost of travelling between home and work if an employee's work is itinerant (Taxation Ruling TR 95/34).

The question of whether an employee's work is itinerant is one of fact, to be determined according to individual circumstances. It is the nature of each individual's duties and not their occupation or industry that determines if they are engaged in itinerant work.

There have been a number of cases where deductions for transport expenses were allowed on the basis of the taxpayers shifting places of work. Shifting places of work is another term for itinerancy. The following characteristics have emerged from these cases as being indicators of itinerancy: 

· travel is a fundamental part of the employee's work

· the existence of a web of work places in the employee's regular employment, that is, the employee has no fixed place of work

· the employee continually travels from one work site to another (an employee must regularly work at more than one work site before returning to his or her usual place of residence)

· other factors that may indicate itinerancy (to a lesser degree) include:

· the employee has a degree of uncertainty of location in his or her employment (that is no long term plan or regular pattern exists)

· the employee's home constitutes a base of operations

· the employee has to carry bulky equipment from home to different work sites, and

· the employer provides an allowance in recognition of the employees need to travel continually between different work sites.

In your case, you travel from your home to your allocated work site and live in leased accommodation for several months at a time. Your travel is not a fundamental part of your work as it is considered that you are living away from home for work rather than travelling on work. That is, during these periods you are living in these locations and you travelled because your work had been moved to these locations for those periods.

You do not have a 'web' of work-places as you are not required to travel to different work locations each day to carry out your duties.

You do not travel to a number of sites within the day before returning home; there is a long term plan and regular pattern; you are not required to carry bulky equipment; your employer does not pay you a travel allowance.

Based on the indicators above, your work is not considered to be itinerant. Therefore, you are not entitled to a deduction for the cost of travel between your home and work.

Accommodation and meals

Some expenses are incurred in order to put you in a position to be able to earn your assessable income. For example, unless you get yourself to work it is not possible to earn your income. Such expenses are incurred before you have commenced your duties and thus before your income is being earned (Lunney's Case).

Similarly, accommodation expenses incurred by an individual who lives away from home to carry out the duties of their employment will not be deductible. Expenses of this nature have been found to be private or incurred before or after the activity of earning assessable income.

The issue of expenses incurred in relation to accommodation near the work-place and meals away from home while maintaining a family residence in another location has been considered by the courts.

In the case Federal Commissioner of Taxation v. Charlton 84 ATC 4415; (1984) 15 ATR 711, the taxpayer worked in Bendigo as both a pathologist and as an assistant to the local coroner. As his permanent family home was in Melbourne, he rented a flat in Bendigo. As he worked Monday to Friday in Bendigo, the taxpayer was reluctant to make the round trip to Melbourne without rest. The taxpayer claimed that the rental was incurred in the production of assessable income, but the Court ruled that the expense of accommodation was considered private and domestic in nature and would not be deductible under section 8-1 of ITAA 1997.

This is supported by the decision in FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 (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.

You incur expenses for renting accommodation to enable you to work in a different town to where your principal residence is. However, as in Toms' Case, the expenses are a prerequisite to the earning of assessable income. They are incurred in order to enable you to earn income but are not incurred in the course of gaining or producing that income. A deduction is therefore not allowable for your rental accommodation and meal expenses.