Edited version of your written advice

Authorisation Number: 1012882334507

Date of advice: 22 September 2015

Ruling

Subject: Work related expenses

Question 1

Are you entitled to a deduction for rent paid?

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

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You have been seconded to another State for a period of approximately 2 years.

Your rent is being reimbursed by your employer.

The reimbursement is included in your gross wages.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

ATO Interpretive Decision ATO ID 2002/616 provides guidance on the deductibility of accommodation expenses for a person living a long distance from their workplace.

Generally, travel and accommodation expenses incurred by an employee who lives away from home to carry out the duties of their employment will not be deductible. Expenses of this nature have been found to be private or incurred before or after the activity of earning assessable income.

In FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466, the Federal Court disallowed a forest worker's deduction for the cost of maintaining a caravan and other living expenses. The taxpayer incurred the expenses in providing temporary accommodation at the base camp because the taxpayer had chosen to reside at a place far from the worksite. These expenses were dictated not by work but by private considerations.

An employer's requirement that an employee incur expenditure which is not related to income-producing activities does not convert that expenditure into a deductible outgoing (FC of T v. Cooper 91 ATC 4396 at 4414; (1991) 21 ATR 1616 at 1636 (Cooper's case)).

In Cooper's case the taxpayer was a professional footballer who was ordered by his coach to eat large quantities of particular foods as he needed to gain weight. If he did not gain this weight, he would be dropped from first grade to reserve grade and this would drastically reduce his income. The courts found that whilst the expense affected his income, gaining weight was not part of his income earning activities and the expense of purchasing additional food remained private.

In Cooper's case Hill J said: 

...the fact that the employee is required, as a term of his employment, to incur a particular expenditure does not convert expenditure that is not incurred in the course of the income producing operations into a deductible outgoing.

In your case, you have been seconded to a new state and you incur rental expenses. The expenses would not have been incurred but for the requirement by your employer to live close by. However, the expenses are a prerequisite to the earning of assessable income. As in Cooper's case, the expenditure does not convert to expenditure incurred in the course of producing your income because it is a requirement of your employment contract. The expenses are incurred in order to enable you to earn income but are not incurred in the course of gaining or producing that income. The fact that your employer reimburses the rent expense does not alter the nature of the expenses.

Accordingly your accommodation expenses are not deductible under section 8-1 of the Income Tax Assessment Act 1997.