Edited version of your written advice

Authorisation Number: 1012711865364

Ruling

Subject: Travel and accommodation

Question

Are you entitled to a deduction for travel and accommodation expenses?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2014

The scheme commenced on

21 February 2013

Relevant facts

You were made redundant from your job and found it difficult to find work in Australia.

You were offered employment overseas for a 12 month period.

You incurred expenses for relocation, living and personal expenses.

Your family remained in Australia.

You shared accommodation with a resident overseas.

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.

Travel

A deduction is generally not allowable for the cost of travel by an employee between home and their normal workplace as it is considered to be a private expense. The cost of travel between home and work is generally incurred to put the employee in a position to perform duties of employment, rather than in the performance of those duties (see paragraph 77 of Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses).

However, there are situations where it has been accepted that travel by employees from home to work is deductible. Taxation Ruling IT 2543 Income Tax : Transport Allowances : Deductibility Of Expenses Incurred In Travelling Between Home And Work, summarises these situations as follows: 

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

b) the taxpayer's employment can be construed as having commenced before or at the time of leaving home; 

c) the taxpayer has to transport by vehicle bulky equipment necessary for employment; 

d) the taxpayer's employment is inherently of an itinerant nature; 

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

Your situation does not correspond with any of the above situations.

In your case, you live in one city and travel to a second city to perform your duties.

The cost of travel is not deductible as it is considered to be home to work travel and is a private expense.

Accommodation

As a general rule, expenditure on 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 overseas. Your expenses relating to residing overseas are considered to be of a private and domestic nature. Accordingly, a deduction for these expenses is not allowable.