Edited version of your written advice

Authorisation Number: 1012698883713

Ruling

Subject: Grant and relocation expenses

Question 1

Is the relocation grant you received assessable?

Answer

Yes.

Question 2

Are you entitled to a deduction for relocation expenses?

Answer

No.

Question 3

Are you entitled to a deduction for the cost of a second car?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2014

The scheme commenced on

1 July 2013

Relevant facts

You are a professional.

You were granted an amount as an incentive to relocate to a rural area as well as an aid to cover the costs to move to the remote area.

You sold some of your possessions and sent the remainder to the new location.

You incurred accommodation expenses whilst searching for a place to rent in the new location.

Once you rented a house, you then bought new furniture and household items.

As public transport in the new location was not as good as your old location you bought a second car to get you and your family around.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 6-5(2)

Income Tax Assessment Act 1997 Section 6-10

Income Tax Assessment Act 1997 Section 15-2

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Grant

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.

Section 6-10 of the ITAA 1997 provides that amounts that are not ordinary income may be included in assessable income under another provision as statutory income.

Section 15-2 of the ITAA 1997 provides that the value of all allowances, gratuities, compensation, benefits, bonuses and premiums given or granted in respect of employment or services rendered are included in assessable income.

Therefore, if a grant is considered to be ordinary income or an allowance, a gratuity or a benefit under section 15-2 of the ITAA 1997, it will be assessable income.

Whilst the grant you received was not salary and wages it was received in respect of your employment or services rendered and as such it is assessable income.

Relocation expenses

Section 8-1 of the ITAA 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.

Taxation Ruling IT 2614 Income Tax and Fringe Benefits Tax: Employee expenses incurred on relocation of employment, examines the deductibility of relocation expenses. The ruling states that expenses incurred in relocating to take up an appointment with a new or existing employer are not allowable deductions as they are private or domestic in nature. This is so, regardless of whether an allowance has been paid, or if the relocation was involuntary.

Taxation Ruling IT 2481 Income Tax: Travelling expenses of an employee moving to a new locality of employment, also discusses this expense. At paragraph 9 the ruling states the expenditure is not incurred in gaining or producing income and is not deductible as the taxpayer is not travelling on work, but to work.

In your case, you incurred expenditure in relocating to where you would be working. While we accept that you would not have incurred the expense if you had not taken the new position, the expenses still retain their private or domestic nature.

Therefore, you are not entitled to a deduction for the relocation expenses.

Car

We accept that you may not have needed to buy a second car had you not taken up the position in the remote location. However, the cost of a car is not incurred in doing the activity that produces your assessable income. The cost is a private or domestic expense and no deduction is allowed.