Edited version of private advice

Authorisation Number: 1012653185378

Ruling

Subject: Relocation and meal and accommodation expenses

Question

Are you entitled to a deduction for relocation expenses, rent, utilities, groceries, meals and car expenses?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts

You are an employee.

You were sent by your employer to another state for a placement for several months as part of your training.

You maintained a principal place of residence.

Your placement was compulsory.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 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.

Accommodation, food, incidentals and car expenses

As a general rule, expenditure on meals and accommodation while working away from home is not allowed as a deduction. These costs are essentially 'living expenses' of a private or domestic nature. The fact that income cannot be earned unless certain expenses are necessarily incurred is not determinative of deductibility.

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. The reasoning in these cases is that a taxpayer's choice to establish a residence is not dictated by travel needs, but by considerations of a private or domestic nature. It follows that the required connection between second residence expenses and a taxpayer's income-producing activities is absent.

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.

In your case, you have established a second residence. Your rent, utilities, groceries, meals and car expenses are considered to be of a private and domestic nature. Accordingly, a deduction for these expenses is not allowable.

Relocation

Taxation Ruling IT 2481 Income Tax: Travelling Expenses Of An Employee Moving To A New Locality Of Employment, provides the Commissioner's view on the deductibility of relocation expenses. When a taxpayer transfers employment from one locality to another and incurs expenditure in moving from one place of residence to a new place of residence to take up the duties of the new position, that expenditure is not incurred, in the Commissioner's view, in gaining or producing assessable income and is not deductible under section 8-1 of the ITAA 1997.  The taxpayer is not travelling on his or her work but is travelling to his or her work.  This is consistent with the view in the Federal Court case Fullerton v. FC of T 91 ATC 4983; 22 ATR 757 (Fullerton's case).

In Fullerton's case, it was held that the shortfall between the costs of relocation and the employer's partial reimbursement was not a loss or outgoing incurred in the gaining or producing of income, notwithstanding that the relocation was in response to the changing necessities of work.  

The relocation expenses are not incurred in gaining or producing your assessable income but rather as a prerequisite to earning that income and consequently are of a private nature. Therefore, you are not entitled to a deduction.