Edited version of your written advice

Authorisation Number: 1012850379772

Date of advice: 30 July 2015

Ruling

Subject: Travel expenses

Question 1

Are you entitled to a deduction for the cost of travelling between one workplace and another workplace?

Answer

Yes.

Question 2

Are you entitled to a deduction for the cost of travelling between your home and your workplace and for travelling between your two homes?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2015

The scheme commenced on

1 July 2014

Relevant facts

You have an established business in one city and you are building your business in another city. You have an office in each city where you conduct your business. You maintain a residence in each city.

You have a different set of clients in each city and several times each month you will travel between the cities to conduct your business with your clients. The work that you are doing at any time can be work for clients from either city.

Your trips include travel between a residence in one city and the workplace in the other city, between the two workplaces and between the two residences. There are times when you travel outside business hours and you travel directly to the other residence and the next day you will travel to the office to commence work.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

General principles for deductibility of travel expenses

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 the course of gaining or producing assessable income, but are not allowable to the extent that they are of a capital, private or domestic nature.

It is settled law that expenses of travelling to work are not deductible as they are not incurred in gaining the assessable income, but as a pre-requisite to gaining assessable income.

In considering the deductibility of travel expenses a distinction is made between travel 'to work' and travel 'on work'. It is only if the duties of the job require a taxpayer to travel that the taxpayer's expenses can be deducted (Taylor v. Provan 1975 AC 194).

The case of Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 7 AITR 166; (1958) 11 ATD 404 settled the principle that travel to and from work is ordinarily not deductible. The Full High Court held that costs incurred by a taxpayer in travelling to the place where they work are expenses incurred in order to enable them to earn income but are not expenses incurred in the course of earning that income. The travel is considered to be of an essentially private or domestic nature.

Generally the expenses of travel to and from work are not deductible and this would include travel between two residences. This is either because such expenditure is private in nature, or because it is not an expense incurred in gaining or producing assessable income.

Taxation Ruling IT 2199 states a deduction is allowable for the cost of travelling directly between two places of business. This is provided that the travel is undertaken for the purpose of engaging in income-producing activities.

Alternative workplace

A deduction in relation to home to work travel has been allowed where a taxpayer travels from their first workplace to an 'alternative' workplace and then from this alternative workplace to home. In this case, a taxpayer can claim for the travel costs incurred both between the two workplaces and between the second workplace and home.

As outlined in paragraphs 145-148 of Taxation Ruling TR 95/14 Income tax: employee teachers - allowances, reimbursements and work-related deductions, an 'alternative' workplace is distinguished from a taxpayer's 'normal' work place, such as when a teacher is required to travel from their school to an administrative centre (paragraph 146).

Application to your circumstances

While we recognise your particular circumstances, the reason behind your travelling changes with the circumstances of the particular trip. With the change in circumstances the character of the expense changes.

In your case, your travel between home and work and between homes is not 'on work' it is travel to put you in a position to work.

These journeys are considered to be private or domestic in nature and, as such, no deduction is allowed.

With respect to the 'alternative workplace' principle, neither of your two offices are 'alternative' workplaces in a manner similar to that described in TR 95/14. Rather, you have two 'normal' workplaces between which you divide your working time. Thus, where you travelled from one office directly to the other before travelling home, you would not be allowed a deduction for the cost of travelling between the second workplace and your home.

The cost of travelling between your places of business is deductible.