Edited version of your written advice

Authorisation Number: 1013067451808

Date of advice: 8 August 2016

Ruling

Subject: Deductibility of car park expenses

Question and answer

Were you entitled to a deduction for the cost of monthly parking of your employer's car near your residence?

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 a company.

You are an employee of the company.

Your employer provides you with a car as you are required to carry out your work duties.

Your employer's office is a number of kilometres away from where you live.

You found it was unrealistic for you to take public transport to your employer to pick up the car with the stock and return the car to the office after work every day.

You paid for car parking near your residence as there was no free parking available.

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 a loss and outgoing to the extent that it is incurred in gaining or producing assessable income. However, a loss or outgoing is not deductible if it is of a capital, private or domestic nature, or it is incurred in gaining or producing exempt income.

A number of significant court decisions have determined that for an expense to be an allowable deduction:

• it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense (Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166 (Lunney's case)),

• there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income (Ronpibon Tin NL v. FC of T, (1949) 78 CLR 47; (1949) 4 AITR 236; (1949) 8 ATD 431), and

• it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income (Charles Moore Co (WA) Pty Ltd v. FC of T, (1956) 95 CLR 344; FC of T v. Hatchett, 71 ATC 4184).

A deduction is generally allowable for parking fees incurred while travelling in circumstances where the travel expenses are deductible, for example, while travelling between two places of work.

In your case, you incurred parking fees for parking your employer's car near your residence. The parking expenses relate to your overnight parking after the completion of your day's work. Parking costs incurred for parking at or near your place of residence is of a private nature. Furthermore, the expenses were not incurred in carrying out your employment duties.

Although the private use of your employer's car was limited to home to work travel and you would not otherwise have a car, this does not change the nature of the expense. The car parking expenses were not an outgoing incurred in gaining your assessable income. That is, there was an insufficient connection between the car parking expenses and your employment duties. Therefore, you were not entitled to a deduction for the cost of monthly parking of your employer's car near your residence under section 8-1 of the ITAA 1997.