Edited version of your written advice

Authorisation Number: 1012948290433

Date of advice: 2 February 2016

Ruling

Subject: Expenses Involved With Working Overseas

Question

Are you entitled to claim a deduction for travel, meals, and accommodation expenses while working overseas?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Your employer in Australia is undertaking a project overseas in collaboration with an overseas institution.

You will be relocating overseas for a period of 10 months to work on this project at the overseas institution.

You will continue to receive your pay from your employer and you will not receive any financial support from the overseas institution.

You will be incurring transportation, accommodation and meal expenses.

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) deals with general deductions and allows a deduction for all losses or 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.

Travel

A deduction is generally not allowable for the cost of travel by an employee between home and their workplace as it is considered to be a private expense or because it is not an expense incurred in gaining or producing assessable income. The cost of travel between home and work is generally incurred to put the employee in a position to perform duties of employment, rather than in the performance of those duties (paragraph 77 of Taxation Ruling TR 95/34).

The mode of transport, the availability of transport, the distance travelled and the necessity of travel do not alter the essential character of travel between home and work as being private in nature.

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.

Meal expenses

Meal expenses are normally private or domestic in character and therefore are not deductible under section 8-1 of the ITAA 1997.

There are only two situations where meal expenses are deductible. They are where a taxpayer is away from home overnight while travelling on work and where a taxpayer is paid an allowance in connection with overtime worked.

Accommodation

Accommodation expenses are normally private or domestic in character and therefore are not deductible under section 8-1 of the ITAA 1997.

The issue of expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location was considered in FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 (Toms' Case).

In Toms' Case, the taxpayer was a forest worker who during the working week lived in a caravan in a bush camp 108 kilometres from his family home in Grafton. He claimed it was too far to travel each day to his work in the forest, so that it was necessary to establish a caravan at the camp. He would return home on weekends. He claimed the costs of maintaining his caravan and other living expenses such as the cost of heating and lighting. The Federal Court considered that the caravan was rendered necessary as much by the taxpayer's choice of the place of his residence in Grafton as by his choice of employment in the forest, and its purpose was to enable him to retain his residence at Grafton although employed in the forest. It was held that the expenses incurred in relation to the temporary accommodation near the workplace while maintaining a family residence in another location were dictated not by his work but by private considerations, and therefore were not deductible.

Summary of deductibility principles for travel expenses

Accommodation and meal expenses are living expenses and as such are intrinsically private or domestic in nature. However, these expenses may be considered to be work related where they are incurred while an employee is travelling on work.

Miscellaneous Taxation Ruling MT 2030 discusses the difference between travelling on work and living away from home for work. It states that travelling on work occurs where the employee is travelling in the course of carrying out their duties of employment (such as an interstate truck driver or a travelling salesperson) whereas a person is living away from home for work where they have moved and taken up temporary residence away from their usual place of residence so as to be able to carry out employment duties for a time at the new (but temporary) workplace.

Where an employee is living away from home for work, their accommodation and meal expenses retain their character as private living expenses. Any transport expenses incurred in travelling to and from their new workplace are also private in nature. Consequently these expenses are not deductible.

Application to your circumstances

You have a new work location for a 10 month period. You are living away from home for work during that period rather than travelling in the course of undertaking work duties.

As you are living away from home for work, your meal and accommodation expenses remain private in nature. Your costs of transport to and from your new work location are also private in nature. Also, these expenses are incurred in order to put you in a position to perform duties of employment, rather than in the performance of those duties. Therefore, these expenses are not deductible.