Edited version of your written advice

Authorisation Number: 1012853128551

Date of advice: 3 August 2015

Ruling

Subject: Work related expenses

Question 1

Are you entitled to a deduction for meals, incidentals and accommodation while working in City B?

Answer

No.

Question 2

Are you entitled to a deduction for the reasonable amount for days spent on investment property matters?

Answer

No.

Question 3

Are you entitled to a deduction for the cost of air fares to City B?

Answer

No.

Question 4

Are you entitled to a deduction for costs incurred in driving to City A?

Answer

No.

Question 5

Are you entitled to a deduction for accommodation expenses when travelling from City B to City A?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2015

The scheme commences on

1 July 2014

Relevant facts and circumstances

You are employed by an organisation.

You live and work in City A.

You flew to City B in 2014.

You had approval to work in City B and attended the office for a number of days

The subject matter expert relevant to the business case you were working on is located in City B.

You did not receive an allowance from your employer nor were you reimbursed for any expenses during your stay in City B.

At the time your section's budget probably wouldn't have allowed for any expenditure for interstate travel whether it was necessary or not.

You own several investment properties in City B. You conducted repairs to the kitchen, lights, fence etc. for several days during your stay in City B. Some of this work was completed by tradespeople.

You visited the investment properties using a vehicle that you purchased from your relative while staying in City B.

You drove back to City A in this vehicle.

You incurred accommodation expenses as it took you a number of days to drive from City B to City A.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 Subdivision 900-B

Reasons for decision

Question 1

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 exempt income.

The cost of meals and other incidentals is normally considered to be a private expense and is not an allowable deduction under section 8-1 of the ITAA 1997. However, where you are required to sleep away from home in the performance of your duties, expenditure on food and drink is considered to have been necessarily incurred in the performance of your duties and a deduction is allowable.

In this case, you live and are employed in City A. While you were approved to work from your employer's City B office for a number of days, we do not consider that you were required to travel to City B for your employment duties. You were not paid any travel allowance, nor did your employer reimburse you for any expenses that you incurred.

We acknowledged that your employer may have benefited from you working in City B; however this does not demonstrate that it was a requirement for you to travel for work. You indicated in your application for private ruling that your section's budget probably wouldn't have allowed for any expenditure for interstate travel whether it was necessary or not. This also indicates that you were not required to travel for work.

Therefore, you are not entitled to a deduction for meal, incidental or accommodation expenses.

Reasonable travel allowance amount

Under Subdivision 900-B of the ITAA 1997, a deduction is not allowable for a work expense, including a meal allowance expense or travel allowance expense, unless the expense qualifies as a deduction under a provision of the Act and written evidence of the expense has been obtained and retained by the employee taxpayer.

Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses; provides the Commissioners views on situations where a taxpayer may be entitled to a deduction up to the 'Reasonable travel allowance amount' as determined by the Commissioner.

Paragraph 18 of Tax Ruling TR 2004/6 provides that for a taxpayer's domestic travel allowance expenses to be considered for exception from substantiation, you must be paid a bona fide travel allowance. The allowance must be paid to cover work-related travel expenses incurred for travel away from your ordinary residence, undertaken in the course of performing duties as an employee and which involves sleep away from home.

In your case, you wish to claim the Commissioner's reasonable amount for travel expenses. However, as discussed above you are not entitled to a deduction for these expenses.

Even if we had determined the expenses were deductible, you were not in receipt of a bona fide travel allowance and therefore could not rely on the Commissioners 'Reasonable travel allowance amount'.

Question 2

As discussed above, you cannot utilise the 'Reasonable travel allowance amount' determined by the Commissioner as you were not in receipt of a travel allowance. Further, those amounts can only be used in relation to work related deductions and not expenses incurred in relation to investment properties.

Question 3, 4 and 5

As discussed above, we do not consider you were required to travel to City B for work purposes. Therefore, you cannot claim a deduction for the cost of your airfares as a work related expense. Nor can you claim the cost for the car expense incurred to travel back to City A or any accommodation expenses.

However, we must also consider whether these expenses are related to the production of your investment property income. If you travel to inspect or maintain your investment property or collect rent, you may be able to claim the costs of travelling as a deduction. You are allowed a full deduction where the sole purpose of the trip related to the rental property. However, in other circumstances you may not be able to claim a deduction or you may be entitled to only a partial deduction.

If you fly to inspect your rental property, stay overnight, and return home on the following day, all of the airfare and accommodation expenses would generally be allowed as a deduction provided the sole purpose of your trip was to inspect your rental property.

Where travel related to your rental property is combined with a holiday or other private activities, you may need to apportion the expenses. The rental property guide 2014-15 provides the following example:

The Hitchmans owned a rental property in a resort town on the north coast of Queensland. They spent $1,000 on airfares and $1,500 on accommodation when they travelled from their home in Perth to the resort town, mainly for the purpose of holidaying, but also to inspect the property. They also spent $50 on taxi fares for the return trip from the hotel to the rental property. The Hitchmans spent one day on matters relating to the rental property and nine days swimming and sightseeing.

No deduction can be claimed for any part of the $1,000 airfares.

The Hitchmans can claim a deduction for the $50 taxi fare.

A deduction for 10% of the accommodation expenses (10% of $1,500 = $150) would be considered reasonable in the circumstances.

In this case, there was a private component to your travel to City B. Your family is located in City B and you stayed with them during your time there. The first X days you spent in City B were not spent on your investment properties. The next Y days were spent on rental properties matters and then it took you Z days to drive home to City A. We consider that your circumstances are similar to the example outlined above in that a significant portion of your trip was for private activities.

Therefore, no deduction can be claimed for the airfares to City B or the car and accommodation expenses incurred to travel back to City A. Further, as you stayed with family during your time in City B, you did not incur any accommodation expenses that can be claimed as deductions.