Edited version of private advice

Authorisation Number: 1012679873751

Ruling

Subject: Accommodation and meal expenses

Question

Are you entitled to a deduction for your accommodation and meal costs while in city A?

Answer

No.

This ruling applies for the following periods

Year ended 30 June 2014

Year ended 30 June 2015

The scheme commenced on

1 July 2013

Relevant facts

You are a full-time employee and also work in private practice.

You will be attending place B for a six month fellowship.

The fellowship provides hands-on training in work related areas.

During the six month period you will attend other conferences.

The conferences are for between two and six days. You will stay in hotels while at the conferences.

You will go overseas on your own and your spouse will join you after X months.

At the end of your training, you and your spouse will take a X week holiday prior to returning to Australia.

Your children will stay in your Australian home after your spouse joins you overseas.

You will stay in rented single person accommodation until your spouse joins you at which time, you will move to a nearby flat which will accommodate two people.

You will not return to Australia during the six month period as the intensity of the study courses will not allow the time to do so.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

Accommodation expenses

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and 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 the purpose of 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, or a provision of the ITAA 1997 prevents it.

A number of significant court decisions have determined that for an expense to be an allowable deduction:

• it must have the essential character of an outgoing incurred in gaining

assessable income or, in other words, of an income-producing expense

(Lunney v. FC of T; (1958) 100 CLR 478 (Lunney's case)),

• there must be a nexus between the outgoing and the assessable income so

that the outgoing is incidental and relevant to the gaining of assessable

income (Ronpibon Tin NL v. FC of T, (1949) 78 CLR 47 (Ronpibon's case)), and

• it is necessary to determine the connection between the particular outgoing

and the operations or activities by which the taxpayer most directly gains or

produces his or her assessable income (Charles Moore Co (WA) Pty Ltd v.

FC of T, (1956) 95 CLR 344; FC of T v. Hatchett, 71 ATC 4184).

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.

Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business considers occasions where accommodation expenses and other travel expenses may have the essential character of an income-producing expense where the expenditure is incurred while away from home overnight on a work related activity or away from home overnight in connection with a self-education activity. Such expenses incurred may be deductible under section 8-1 of the ITAA 1997.

However, where a taxpayer is away for an extended period of time and has established a new home, the associated costs including accommodation and meals remain private in nature and are not deductible under section 8-1 of the ITAA 1997.

TR 98/9 lists the key factors to be taken into account in determining whether a new home has been established. They include:

• the total duration of the travel

• whether the taxpayer stays in one place or moves frequently from place to place

• the nature of the accommodation (hotel, motel, long term accommodation)

• whether the taxpayer is accompanied by his or her family

• whether the taxpayer is maintaining a home at the previous location while away, and

• the frequency and duration of return trips to the previous location.

TR 98/9 provides examples designed to illustrate factors and circumstances that are relevant in determining whether a taxpayer has established a new home in the new location. No one test will satisfy all circumstances. The question of whether a new home has been established depends on all the facts.

Example 1:     Elizabeth ordinarily lives with her parents in a country town outside Brisbane. She takes 4 months leave from her job to undertake a course of education at a training college in Brisbane. She shares a rented unit in Brisbane with two other students and returns to her parental home every weekend and during holiday periods.

The relatively short period of her stay in Brisbane and the frequency of her return visits to her parental home indicate that Elizabeth has not established a new home in Brisbane.

Example 2:     John, who is single, decides to undertake a 2-year course of study at a university in a city 250 kilometres from the town where he lives with his parents. He shares a rented house with some other students during this period and takes a casual job. He occasionally returns to the parental home on weekends. 

The length of time that John resides in the city, the long term nature of his accommodation and the fact that he has employment in the city indicate he has established a new home.

Example 3: Madonna undertakes a 5-month study tour in Europe. Her husband and family remain at the family home in Melbourne. The study tour involves travel to four separate locations in Europe for periods of between four and six weeks each. At each location, Madonna stays in serviced apartments.

The relevant factors are the short-term nature of the tour and accommodation, travel to several locations and the fact that she is maintaining a home in Melbourne. Together, they indicate that Madonna is travelling away from her home. The conclusion is the same if Madonna was accompanied by her husband and family and their Melbourne home was rented out for the period of the study tour.

Example 4: James, a university lecturer, travels overseas for 12 months to undertake a studies program. He spends 10 months in the USA where he attends a university and 2 months based at an academic institution in the UK. He is accompanied by his wife and the family home in Australia is rented out while he is away. While in the USA, he resides with his wife in an apartment leased for the duration of their stay.

The facts indicate that James has established a new home in the USA for the period of his stay. He stayed in one place in leased accommodation with his wife for the 10-month period and the family home in Australia was rented out during the period he was away.

Example 5: Katherine travelled overseas for 6 months to study at a university in Germany. She was accompanied by her husband and three children. An apartment suitable to accommodate the family was rented for the period of her stay and the family home in Australia was rented out.

The relevant factors are the period of time away, the renting of the family home and staying in one place with her family. These factors indicate that a new home was established in Germany.

In your case, you are living in city A for six months. Your spouse will join you after X months. You will be staying in single accommodation for the first Xmonths, then move to a larger flat nearby when your spouse arrives.

You refer to Case V15 ATC 177 as discussed in paragraph 103 of TR 98/9. This case has facts similar to example four above and the Commissioner contended that the taxpayer had established a new residence overseas. While some accommodation deductions were allowed in Case V15, the tribunal found that the Commissioner's argument could not easily be dismissed. As highlighted in Case V15, continued ownership of a former home is not alone enough to qualify as tax deductible expenses incurred in maintaining other accommodation taken up in order to perform the duties of employment. Also, the need to secure alternative accommodation in order to enable a taxpayer to carry out the duties of a new or continuing employment for a fixed term is not enough.

In Park v FC of T 2011 ATC 10-198, the taxpayer travelled back and forth between Perth and Sydney many times. His initial contract was for three months and the expenditure was found in the income producing activities conducted under the contractual arrangement and was not private or domestic expenditure. The circumstances in this case differ from your circumstances. Therefore this case has no application in your situation.

Although you may also be attending other conferences during your fellowship, these conferences are for less than a week and you will be returning to your city A accommodation after the conferences. It is not considered that you are moving frequently from place to place as in example 3 above where the person was in each place for four to six weeks. Your base for the six months is in city A. The fact that you moved to another place when your spouse arrived is a choice based on your personal circumstances and not regarded as a work related choice. You are not living in hotels or motels while in city A. The rental accommodation is more long term in nature. Six months is considered to be an extended period of time and more than the X month period as in example 1 above. Your spouse is with you for part of the time. It is acknowledged that you have retained your home in Australia. However, this is not a decisive factor. A person can have two homes.

After reviewing your specific circumstances and the key factors as outlined in TR 98/9, it is considered that you will establish a new home in city A. Therefore, you are not entitled to a deduction for your accommodation or meal expenses while living in city A, as the expenses are not incurred in gaining or producing assessable income. The expenditure is inherently of a private or domestic nature and is not allowable under section 8-1 of the ITAA 1997.