Edited version of your written advice

Authorisation Number: 1051316355937

Date of advice: 4 December 2017

Ruling

Subject: Travel and accommodation expenses while on secondment

Question

Can you claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 for the accommodation, rental vehicle and food costs incurred while working on secondments?

Answer

No

This ruling applies for the following period:

Year ended 30 June 2017

The scheme commences on:

1 July 2016

Relevant facts and circumstances

You are an Australian resident for taxation purposes.

Your principle place of residence is a home you own located in suburb A of city A.

You are employed by a large organisation working at the location of entity A approximately 15 kms from your place of residence.

You are undertaking specialist training and under the terms of your contract you are required to be seconded to other locations in your state.

Secondment 1 –

You were seconded to work in another location in suburb B of city A for a period of 100 days.

You were paid your wage by entity B for the period of time you worked there on secondment.

You rented accommodation closer to the entity which is located at suburb B. You incurred costs for the rented accommodation.

You were paid an extra travel mileage claim by the entity B.

Secondment 2 –

You were seconded to work in another location in city B for a period of 85 days.

You were paid your wage by entity C for the period of time you worked there on secondment.

You rented accommodation in city B, and a motor vehicle to drive from the rented accommodation to the work location. You incurred costs for the rented accommodation and vehicle.

You were reimbursed an amount by entity C for the costs you incurred for return air tickets from city A to city B.

Relevant legislative provisions

Section 8-1 of the Income Tax Assessment Act 1997.

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for all outgoings to the extent to which they are incurred in gaining or producing assessable income, or are necessarily incurred in carrying on a business for that purpose. However, a deduction is not allowable for outgoings that are of a capital, private or domestic nature. An employee's ordinary costs of travelling between home and work, and maintaining a home and consuming food and drink to go about their daily activities, are of a private or domestic nature and are not deductible. Such costs are 'preliminary to the work' and are not incurred in performing the work activities.

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 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.

As with the general rules regarding travel between home and work, accommodation and living expenses are normally private or domestic in character. Some expenses are incurred in order to put you in a position to be able to earn your assessable income. For example, unless you get yourself to work it is not possible to earn your income.

Similarly, meal and accommodation expenses incurred by an individual 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 Charlton 84 ATC 4415; (1984) 15 ATR 711, the taxpayer was a pathologist whose home was in the Melbourne suburb of Fitzroy. During the relevant period, he performed a number of autopsies at Bendigo, a country town some 150 km from the family home, for which he was paid fees and in order to avoid the fatigue of the travel which would otherwise have been involved, he retained a flat at Bendigo which was available to him. He wrote up the drafts of his autopsy reports at the flat, where he also kept certain medical texts.

Crockett J., referred to the personal nature of expenses incurred by a taxpayer in travelling from his home to his place of work and added:

The Commissioner contends (correctly in my view) that, if the taxpayer should choose to reside so far from the place where it is necessary for him to be in order to gain his income that he not only needs to incur expense in travelling to that place but also to incur expense in the provision to him of some accommodation transitory or discontinuous in its use and secondary to or temporarily supplementary of his actual home, that expense too, is for the same reason non-deductible.

He went further to state that:

The taxpayer's election to live in Melbourne and not in Bendigo meant that the rental expended on the flat in order to enable him to secure accommodation in which to recuperate from the rigors of travel and the nature of his work was an expenditure dictated not by his work but by private considerations.

In Case H104 (1958) 8 TBRD 478; (1958) 7 CTBR (NS) Case 89 an estate agent and insurance consultant who lived 25 miles out of the city and conducted a business in the city and suburbs was denied a deduction for the cost of lodging at a city club during the week to facilitate the operation of the business. The expenditure was considered to be of a private nature in that it was the taxpayer's personal choice to stay at the club for part of each week of the relevant period.

In your case, you incurred expenses for renting accommodation to enable you to work in a different town or suburb to where your principal residence is. However, as in Toms’ Case, the expenses are a prerequisite to the earning of assessable income. They are incurred in order to enable you to earn income but are not incurred in the course of gaining or producing that income.

You have asked whether entity B and entity C will constitute a co-existing workplace for the purposes of claiming a deduction for accommodation, food and hire car expenses because the nature of the travel is considered special demands travel.

Draft taxation Ruling TR 2017/D6 Income tax and fringe benefits tax: when are deductions allowed for employees' travel expenses? states at paragraph 39 that special demands travel involves travel between home and a regular work location where the journey, or part of the journey, is included in the activities for which the employee is paid under the express or implied terms of their employment.

The ruling further states at paragraph 43 and 44 that;

Co-existing work locations travel involves travel which can be attributed to the employee having to work in more than one location. This is the case where:

the travel is directly between work locations, or between home and an alternative work location, and

it is reasonable to conclude that the travel is undertaken in performing the employee's work activities because of the requirement to work in more than one location.

For the purposes of 'co-existing work locations travel', an alternative work location is a work location other than a regular work location near the employee's home.

Whilst the issue of what constitutes a co-existing or alternative workplace will be dependent on the individual facts of the case, the features that may be taken into consideration as to what will characterise an alternative workplace include:

● the short term or temporary duration of the work undertaken there

● the irregularity of the visits to the place, and

● the absence of any regular pattern of travel to the place.

These features are derived from Miscellaneous Tax Ruling MT 2027 Fringe benefits tax : private use of cars : home to work travel. Taxation Ruling MT 2027 deals with home to work travel in the context of fringe benefits tax. However, paragraphs 11 to 13 make it clear that the principles set out in the ruling are equally relevant for income tax purposes.

Paragraph 34 of MT 2027 states that travel between home and an alternative work place is allowable where the following criterions are met:

● the employee has a regular place of employment

● in the performance of their duties as an employee, travel is undertaken to an alternative destination which is not itself a regular place of employment, and

● the journey is undertaken to a location at which the employee performs substantial employment duties.

In your case, your employment contract requires you to work under secondment at other locations throughout the state. The regularity of your work in the other locations prevents it from satisfying the second principle set out in MT2027 which requires that the alternative destination be one that is not a regular place of employment. The other locations are not considered co-existing or alternative workplaces according to MT 2027, but, instead, other regular workplaces.

In your case, you worked solely in another work place for a period of a few months. You performed your normal duties of employment while at this other workplace, but not whilst travelling to the other workplaces, and it was a set pattern during this time that you attend the other work place. Your other work place is considered to be your 'regular' place of employment, rather than an alternate place of employment, for the period you were there. As such the accommodation, food and car rental costs incurred whilst working at entity B and entity C are not deductible under section 8-1 of the ITAA 1997.