Edited version of your written advice

Authorisation Number: 1012776260992

Ruling

Subject: vehicle expenses

Question 1

Is your residence considered to be a place of business?

Answer

No

Question 2

Are you entitled to claim a deduction for vehicle expenses for all travel between your residence and your place of business?

Answer

No

Question 3

Are you entitled to claim a deduction for vehicle expenses for the travel between your residence and your place of business for the purpose of transporting bulky equipment and supplies?

Answer

Yes

Question 4

Are you entitled to claim a deduction for vehicle expenses for travel between your residence and local suppliers to purchase requisites for your business and between your residence and local customers to deliver sales orders?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

The scheme commenced on:

1 July 2012

Relevant facts and circumstances

You operate a primary production business.

The business is operated from a rural property located a distance away from your residence.

You travel to the business as required, at least once a week.

In the busy season, you may need to visit the business more regularly.

You have two large utility vehicles, both with load capacity of more than one tonne that you use exclusively for business use.

You have a large shed located at your residence, which you utilise to store items for small local orders, as well as to conduct maintenance and repairs on the business vehicles and equipment as the shed at your business location has no mains electricity. You also store business supplies in your shed prior to transporting them to your business.

The travel to your business sometimes involves transporting bulky items.

The travel home from your business sometimes involves transporting items back to your residence for convenient access, to sell to local customers. These orders are either picked up by the buyer from the residence or from the nearby storage facility; sometimes you deliver the order to the customer.

You have not had a pick-up or delivery from your residence in the last two weeks, however; in the busy season, you advertise on a free public online buy/sell website to boost your sales. You remove the advertisement when supplies are dwindling so you still have reserves to service your 5 to 6 regular customers who usually have a once per month order.

You occasionally travel from your residence to deliver small orders to local buyers and visit local suppliers to purchase supplies which are then stored at your residence until required at the farm.

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 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 assessable income.

Generally, expenditure in travelling between a taxpayer's home and place of work is of a private nature and is accordingly excluded as a deduction under section 8-1 of the ITAA 1997. Only in certain circumstances is such travel deductible.

Consideration must then be given to Taxation Ruling IT 2199, which states that the travel between two places of employment or business must be for the purpose of engaging in income producing activities. This is of particular importance where one of the places of employment or business is the home of the taxpayer.

Difficulty may arise where a taxpayer lives at one of the places of employment or business because it is not in all cases of this nature that an income tax deduction is allowable for the costs of travel between the employment or business carried on at his home and another employment or business elsewhere. It is necessary that the income producing activity carried on at the taxpayer's home should constitute an employment or a business.

A deduction may be allowable for home to work travel where the transport cost can be attributed to the transportation of heavy, bulky or cumbersome equipment, rather than travel to and from work, which is considered to be essentially of a private nature.

In the case of Federal Commissioner of Taxation v. Vogt (1975) 5 ATR 274; 75 ATC 4073 (Vogt's Case) a deduction was allowed because the expense could be attributed to the transportation of bulky equipment (musical instruments) to varying places of work, rather than to private travel between home and work.

The decision in Vogt's Case is authority for the proposition that where a taxpayer keeps necessary equipment at home which is needed for performing work and by reason of their bulk need to be transported by vehicle from home to their place of work, then the expenses may be characterised as travel 'on work' and therefore may be deductible.

In your case, the activities carried out at your home do not constitute an employment or a business. The primary activities of your business are carried out at your business premises, not your home.

You use your residence to store items for convenience due to your business being located some distance away. Buyers will sometimes pick up purchases from your residence and you will occasionally deliver orders to customers from the supplies you store at your residence. You have 5-6 regular monthly customers; Your residence does not have a regular daily attendance of customers that view it as a place of business.

As such, the activities that you carry out at your residence are viewed as incidental to your business and are not conducted regularly or frequently enough to regard your residence as a place of business.

Therefore, you will need to analyse the purpose of each trip to determine its nature. It is only in certain circumstances, such as when you are carrying bulky equipment, that you are entitled to a deduction for travel to or from your home.

For example:

Travel between your residence and your business that does not involve the necessary transport of bulky items is viewed as private travel between home and work.

Travel to purchase supplies or make deliveries is not home to work travel as it is not travel between home and a usual place of work or business. These trips are undertaken in the course of producing assessable income and are not private in nature. Therefore the expenses incurred to undertake these trips are deductible.