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Edited version of your written advice
Authorisation Number: 1012832932400
Date of advice: 6 July 2015
Ruling
Subject: Deductibility of 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 farm?
Answer
No
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 business producing grain and livestock for sale.
The business is operated from a property which is some distance from your residence.
You travel to the business at least once a week.
You have two large utility vehicles, both with load capacity of more than one tonne that you use exclusively for business use, as you also own two small cars for private use.
You have a large shed at your home which you use in relation to your business.
All of the business activities carried out at your home are infrequent.
You have a small number of clients who come to your house to purchase items.
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.
Taxation Ruling 93/30 outlines the characteristics of a place of business.
This ruling specifically relates to deductions for home office expenses, but the characteristics of a place of business are discussed.
Whether an area of the home has the characteristics of a place of business is a question of fact, which depends on the circumstances of each case.
The following factors, none of which is necessarily conclusive on its own, may indicate whether or not an area set aside has the character of a "place of business":
The area is clearly identifiable as a place of business
The area is not readily suitable or adaptable for use for private or domestic purposes in association with the home generally
The area is use exclusively or almost exclusively for carrying on a business or
The area is used regularly for visits of clients or customers
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 the production of grain and livestock for sale. These activities are carried out at your farm, not your home.
You use your residence to store items relating to your business for convenience due to your business being located some distance away. Buyers will sometimes pick up grain purchases from your residence and you will occasionally deliver orders to customers from the supplies you store at your residence. You have a small number of regular customers, though in the 2-3 month yearly busy season, you have a lot more smaller orders placed due to your advertising on the free public online buy/sell website. Your residence does not have a regular daily attendance of customers that view it as a place of business.
You carry out activities infrequently at the shed on your property along with maintenance of your vehicles when required.
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.
We acknowledge that you believe that these activities are a necessity of running your business, however, just because you do sell grain from your property along with storing items and infrequent vehicle maintenance does not mean that your home is a place of business and as such we do not believe that your activities make it a place of business.
Therefore your travel between your home and business is not an allowable deduction as your home is not a place of business.