Edited version of private advice

Authorisation Number: 1012623756543

Ruling

Subject: Travel, accommodation and meals

Question

Are you entitled to a deduction for travel, accommodation and meals?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

1 July 2012

Relevant facts

You live in City A.

From July to October 2012, you were employed by Company X.

Some work was done in City B and some was done at home in City A.

From November 2012 to June 2013, you were employed by Company Y. You are the sole shareholder and sole director of the company.

Some work was done in City B and some was done at home in City A.

You incurred car expenses in travelling between City A and City B. These expenses are not reimbursed by your employer.

You propose to use the cents per kilometre method to calculate the amount of the tax deduction using the estimated distance travelled for work related purposes.

You have incurred expenses for car, aeroplane, tolls and train/taxi as well as accommodation and meals in City B.

While in City B, you sometimes stay with family members.

You are a consultant in both City A and City B.

Your base of operations and place of work is at home.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 25-100

Subsection 25-100(3)

Reasons for decision

Summary

Your travel, accommodation and meal expenses are considered to be private in nature and are not deductible as City B is considered to be a second work location and your travel is to work and not on work.

Detailed reasons

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a general deduction for 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.

For expenditure to be regarded as being incurred in the course of gaining or producing assessable income, it must be incidental and relevant to that end (Ronpibon Tin NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 8 ATD 431; (1949) 4 AITR 326). The expenditure must be related to the production of assessable income and not incurred at a point too soon to be deductible (Federal Commissioner of Taxation v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 and Steele v. Deputy Commissioner of Taxation (1999) CLR 459; 99 ATC 4242; (1999) 41 ATR 139).

Expenses incurred in travelling are deductible expenses where they are incurred in gaining or producing assessable income or necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. Expenses of simply commuting between home and place of work are generally not deductible (Income Taxation Ruling IT 112).

Expenses incurred in travelling directly between two places of business or a place of employment and a place of business are an allowable deduction where the taxpayer does not live at either of the places and the travel was undertaken for the purpose of enabling the taxpayer to engage in income producing activities (Income Tax Ruling IT 2199).

Section 25-100 allows deductions for travel between workplaces where:

• The taxpayer is an individual;

• The expense is a transport expense; and

• The expense is incurred in travel between workplaces.

However subsection 25-100(3) of the ITAA 1997 specifies that travel between two places is not travel between workplaces if one of the places you are travelling between is a place at which you reside.

In your case you reside at one of the places you work. Therefore you are not entitled to a deduction for the travel between your place of residence and City B. This includes all modes of travel plus associated costs.

Accommodation and meals

Expenditure on the daily necessities of life (for example, accommodation, food and drink) is generally not deductible as it is not incurred in gaining or producing assessable income and is also considered to be private or domestic in nature.

Exceptions to this are where you are undertaking work related travel and are required to stay away overnight. However, no deduction is allowable if a taxpayer is merely maintaining accommodation close to their usual work location for convenience. The fact that income cannot be earned unless certain expenses are necessarily incurred is not determinative of deductibility.

Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example, unless a person arrives at work it is not possible to derive income. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income (Case V111 88 ATC 712).

In FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 the Federal Court disallowed a forest worker's deduction for the cost of maintaining a caravan and other living expenses. The taxpayer incurred the expenses in providing temporary accommodation at the base camp because the taxpayer had chosen to reside at a place far from the worksite. These expenses were dictated not by work but by private considerations.

Where it has been established that a property used to accommodate a taxpayer amounts to a second residence, the Courts and the Administrative Appeals Tribunal have consistently held that the essential character of the expenses incurred is of a private or domestic nature unconnected with income-producing activities and, therefore, the expenses are not deductible.

In your case, the cost of your accommodation and meals in City B is considered to be private in nature as you are not travelling away from home on work. Rather you travel to work in the second work location and stay close to that work location.

Therefore, your accommodation and meal expenses are considered to be private and no deduction is allowed.