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Edited version of your written advice
Authorisation Number: 1012784486271
Ruling
Subject: Relocation expenses
Question
Are you entitled to a deduction for the costs of moving to and living in a new location to redevelop a property?
Answer
No.
This ruling applies for the following period
Year ending 30 June 2017
The scheme commences on
1 July 2016
Relevant facts and circumstances
You are an Australian citizen.
You have lived and worked in another country for a period of time.
You have owned a property in Australia which has been used as a rental property. You have never resided at this property.
You are planning to move to Australia for the purpose of conducting work to redevelop the property.
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.
Expenditure on the daily necessities of life (for example, 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 IT 2614 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 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. 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.
In this case, you intend to relocate to Australia for the purposes of redeveloping a property that you own. You will incur various costs to move to and live in Australia. These expenses are not incurred in the course of gaining or producing your assessable income. We consider that these expenses are of a private nature.
Therefore, you are not entitled to a deduction for the expenses.