Edited version of private advice

Authorisation Number: 1012642264046

Ruling

Subject: Accommodation, meals and motor vehicle expenses

Question 1

Are you entitled to a deduction for accommodation expenses up to the reasonable allowance amounts when working in Location 1?

Answer

No.

Question 2

Are you entitled to a deduction for accommodation in Location 1 for the amount you actually incur where your employer negotiates a rate with the accommodation provider?

Answer

Yes.

Question 3

Are you entitled to a deduction for meals for the amounts you actually incur up to the reasonable allowance amounts when working in Location 1 and 2?

Answer

Yes.

Question 4

Are you entitled to a deduction for meals when working in Locations 3, 4, 5 and 6?

Answer

No.

Question 5

Are you entitled to a deduction for meals or accommodation when working in Location 7?

Answer

No.

Question 6

Are you entitled to a deduction for motor vehicle expenses for travel between home and each location?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

1 July 2012

Relevant facts

You were employed on a five day working week and an allowance was paid only for those days.

You worked for:

• In Location 1 and were paid an allowance for meals and accommodation.

• In Location 2 and received an allowance for meals

• In Locations 3 and 7 you received a daily allowance because of the distance between home and work

• No allowance was paid in Locations 4, 5 or 6

Your employer negotiated an accommodation rate for you in Location 1 and provided accommodation for you in Location 2.

Your employer did not consider that Locations 3, 4, 5, 6 or 7, were far enough away to require you to stay away overnight. They did not pay you an allowance for meals and accommodation for these sites.

You were not paid any amounts for incidental expenses for any of the travel.

You returned home each day when working at Locations 3, 4, 5 and 6.

You stayed overnight in Location 7 which is about a one hour drive from your home.

You did not keep evidence for meal expenses.

When traveling to locations you are not required to carry bulky equipment.

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 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.

You are not automatically entitled to a deduction for expenses incurred in relation to an allowance received. The expenses must meet the criteria for deductibility and the substantiation requirements.

Generally, accommodation and meal expenses are private in nature and are not deductible. However, where you are required to be away from home overnight for work purposes, the expenses are considered to be incurred in producing your assessable income and a deduction may be allowable.

Section 900-50 of the ITAA 1997 provides that the substantiation requirement to obtain written evidence does not apply to claims by employee taxpayers for expenses covered by a bona fide travel allowance if the amount of the claim for expenses incurred does not exceed the amount the Commissioner considers reasonable (Taxation Determination TD 2012/17). The allowance must be paid to cover work-related travel expenses incurred for travel away from the employee's ordinary residence, undertaken in the course of performing duties as an employee (subsection 900-30(3) of the ITAA 1997) and involve sleep away from home. The work-related travel expenses must be for accommodation, or food or drink, or expenses incidental to the travel.

It should be noted that even where the requirement to substantiate your travel expenses does not apply you are only entitled to claim for the expenses you actually incurred. If you incurred less than the reasonable amounts you may only claim the amount you incurred. The Commissioner may ask you to provide calculations of how you arrived at the figure you have claimed. Where you have incurred in excess of the reasonable amounts you may choose to claim the reasonable amounts or if you wish to claim in excess of the reasonable amounts you are required to substantiate the full amount of any claim.

In the case Federal Commissioner of Taxation v. Charlton 84 ATC 4415; (1984) 15 ATR 711 (Charltons case), 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.

Accommodation in Location 1

You received an allowance of $XX per day for accommodation. This is considered to be a bona fide allowance for accommodation. You are therefore entitled to a deduction for the amounts you have actually incurred up to the reasonable allowance amount without the need for substantiation.

Meals in Location 1 and Location 2

The allowances you received for meals when working in Location 1 and Location 2 are considered to be bona fide allowances. Therefore, you are entitled to a deduction for meal expenses you have actually incurred up to the reasonable allowance amounts.

Meals in Locations 3, 4, 5 and 6

You did not stay overnight at Locations 3, 4, 5 and 6. Therefore, you are not entitled to use the reasonable allowance amounts for meals for these locations.

Location 7

You stayed overnight at Location 7. The receipt of an allowance for the days you were working at Location 7 is not considered to be a bona fide allowance for accommodation, meals or incidentals. As you did not receive a bona fide allowance for accommodation, meals or incidentals for this location you cannot claim the reasonable allowance amounts for this location.

It is considered that sleeping overnight at this site was a private choice rather than a requirement in producing your assessable income. Your employer did not require you to work away from home overnight. The principles in Charltons case apply and you are not entitled to a deduction for accommodation or meal expenses as they are considered to be private in nature.

Home to work travel

Generally the expenses of travel to and from work are not deductible. This is either because such expenditure is private in nature, or because it is not an expense incurred in gaining or producing assessable income.

The case of Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 7 AITR 166; (1958) 11 ATD 404 settled the principle that travel to and from work is ordinarily not deductible. The Full High Court held that 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 travel is considered to be of an essentially private or domestic nature.

There are some circumstances where a deduction for travel between home and work may be allowed. The circumstances where home to work travel is considered a deductible expense are:

• where the taxpayer's home constitutes a place of employment and travel is between two places of employment or business;

• where the taxpayer's employment can be construed as having commenced before or at the time of leaving;

• where the taxpayer has to transport by vehicle bulky equipment necessary for employment;

• where the taxpayer's employment is of an itinerant nature; and

• where the taxpayer is required to break his or her normal journey to perform employment duties (other than incidental duties such as collecting newspapers, mail, etc.) on the way from home to the usual place of employment, or from the place of employment to home.

Your circumstances do not correspond with any of the above circumstances. Therefore, you are not entitled to a deduction for home to work travel.