Edited version of your written advice

Authorisation Number: 1013102825748

Date of advice: 21 October 2016

Ruling

Subject: Deduction - work related travel expenses

Question

Are you entitled to claim a deduction for travel expenses incurred as a result of your employment?

Answer

No.

This ruling applies for the following period:

Year ending 30 June 20YY

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You work for a mining company. You are a fly in fly out worker.

Your main residence is in City A. You are required to travel to City B for work.

You leave your home in City A and go straight to the City A airport. You do not go the work office in City A.

You do not receive a payment for the time spent travelling to and from worksites. You are only paid for the time spent on the worksite.

You have incurred travel expenses in relation to air-fares, taxi fares and bus fares.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

Summary

You are not entitled to a deduction for the costs associated with travelling between home and work as it is considered a private expense.

Detailed reasoning

Section 8-1 of the Income Tax Assessment Act 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.

A deduction is generally not allowable for the cost of travel by an employee between home and their normal workplace as it is considered to be a private expense. 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: Taxation Ruling TR 95/34.

Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example unless one arrives at work it is not possible to derive income. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income. Rather, the expenses are incurred to enable the taxpayer to commence income earning activities (Lunney and Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166).

The essential character of travel between home and work is that of a private and domestic nature, related to personal and living expenses as part of the taxpayer's choice of where to live, in choosing to live away from and at what distance from work.

Application to your circumstances

In your case, the travel expenses you have incurred are not considered to be incurred in the course of undertaking your income earning activities. Rather the expenses are incurred by you in putting yourself in a position where you can commence performing your duties, rather than in the performance of those duties.

In your application you have referred to John Holland Group Pty Ltd and Anor v. Commissioner of Taxation [2015] FCAFC 82; 2015 ATC 20-510; 321 ALR 530; (2015) 232 FCR 59 (John Holland) to support your claim for a deduction for travel expenses. This case related to the employer's liability to fringe benefits tax which is reduced when an expense borne by the employer would have been deductible to the employee, had the employee incurred the expense.

In John Holland the taxpayer's presented a hypothetical situation for fly-in fly-out arrangements for workers at their Midwest Project which included:

● employees travelling at their own expense to X airport which was designated as their 'point of hire'

● the employer paid for the employees flights from X to Y Airport and transport to the mine

● employees worked on the project during their rostered on period, at the end of which they would be transported to Y Airport and would catch a flight back to X, at the cost of the employer

● employees would return home from X airport at their own expense

● all flights to and from X to Y occurred while the employees were rostered on, that is the flight was undertaken on the time of the employer

● employees commenced their rostered-on employment duties from the time of their arrival at X airport and were remunerated at an applicable hourly rate for travelling time on the flight from X airport to Y and the return flight

● employees, travelling on the employer's time, were bound to comply with all employer directives and policies, and disciplinary action could result if an employee breached any such requirement during a flight.

The employer argued that the cost of the employees travel would have been deductible to the employee had the employee incurred it.

The Full Federal Court found that the employees' arrival at X airport from their homes was not travel in the employees' derivation of income and any expenditure incurred by the employees from their homes to X airport would not have been deductible. However, the employees were relevantly at work from arrival at X airport and were deriving income from that point. Accordingly the employees would be, on the statutory hypothesis put forward, entitled to a deduction for the cost of air travel from X airport to Y and return.

In support of this view, Edmonds J stated at 2015 ATC 17175:

From the time the John Holland employees … checked in at X Airport they were travelling in the course of their employment, subject to the directions of John Holland and being paid for it. That situation subsisted until they disembarked the plane at X Airport at the end of their rostered-on work time.

Your situation can be distinguished from that of the hypothetical situation in John Holland as you do not commence your rostered time on until you arrive on the worksite nor do you receive payment for your travelling time between City A and the worksite. In John Holland employees commenced their rostered time on when they arrived at X airport, were paid for their travelling time and were subject to the employer's directives and policies. This was a critical component to the decision by the Full Federal Court as it established a link between the travel and the earning of income.

Accordingly, you are not entitled to claim a deduction for the cost of travelling to and from the worksite.