Edited version of your written advice

Authorisation Number: 1051318724821

Date of advice: 11 December 2017

Ruling

Subject: Work Related Expenses – home to work travel with bulky tools

Question

Are your home to work travel costs incurred transporting tools to and from the workplace deductible under section 8-1 of the Income Tax Assessment Act 1997?

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

You are employed by a large entity. This position requires you to have your own tools to carry out your duties and you are paid a tool allowance by your employer.

You store and carry your tools in a toolbox which weighs approximately 27kgs and has dimensions of 54cm x 26cm x 22cm.

Lockers are provided for staff however you advise they are not large or strong enough to accommodate the toolbox and are more suited to changes of clothing.

Your employer permits staff to place their toolboxes in lockable vehicle cupboards on company vehicles which are stored at the workplace. The keys to the vehicles are stored in a staff room. A master key to the vehicle cupboards is held by many staff.

You advise the staff room is not locked or monitored during the day and the main gates to the workplace are not closed during the day. The general public and contractors can enter the workplace.

The gates are closed and locked during the night with a key to the gate held by staff. The vehicles are often used by staff on after hours work or call out emergencies.

You use your own vehicle to travel to and from work. You carry your tools with you to and from work each day.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 8-5

Income Tax Assessment Act 1997 section 12-5

Income Tax Assessment Act 1997 division 28

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 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 losses or outgoings are of a capital, private or domestic nature.

Section 8-5 of the ITAA 1997 deals with specific deductions, and allows deductions where an amount can be deducted under a specific provision of the ITAA 1997, other than within Division 8.

Section 12-5 of the ITAA 1997 lists those provisions dealing with specific deductions. Included in this list is Division 28 of the ITAA 1997 which deals with car expenses. Division 28 sets out the rules for working out deductions for car expenses if you own or lease a car.

Therefore, in considering whether you are entitled to a deduction for car expenses it is necessary to consider whether the expenses were incurred in travelling in the course of producing your assessable income.

Travel to and from work are essentially private and domestic in nature.

However, the Commissioner accepts that expenses incurred by employees in travelling to and from work are deductible in certain circumstances. One of the exceptions to the general view is where the employee is required to transport bulky equipment necessary for employment. Paragraphs 63 and 64 of Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses state that:

If the equipment is transported to and from work by the employee as a matter of convenience or personal choice, it is considered that the transport costs are private and no deduction is allowable.

A deduction is not allowable if a secure area for the storage of equipment is provided at the work place (see Case 59/94 94 ATC 501; AAT Case 9808 (1994) 29 ATR 1232).

This view is supported by Deputy President Frost in Ford v Commissioner of Taxation [2014] AATA 361.

The question of what constitutes bulky equipment must be considered according to the individual circumstances in each case.

In Crestani v. FC of T 98 ATC 2219; (1998) 40 ATR 1037 (Crestanis Case), a toolbox which measured 57 x 28 x 25 centimeters and weighed 27 kilograms was considered as bulky, in the sense of cumbersome, and the transport cost was attributable to the transportation of such bulky equipment rather than private travel between home and work. The employer did not provide a secure storage area for the toolbox and the use of public transport was not a viable option.

While the tool box you carry may be considered bulky in the sense of cumbersome, the issue of a secure storage area being provided by your employer requires further consideration.

In Case Z22 92 ATC 230; 23 ATR 1189, the taxpayer was required to supply his own tools and received a tool allowance. The larger tools were kept in a standard-sized tool box which was stored in a padlocked mesh cage. The other tools were kept in a canvas bag which the taxpayer could carry over his shoulder. Although the taxpayer was provided with a locker at the airbase, he took the canvas bag home in the boot of his car every night. The taxpayer claimed a deduction for the costs of travelling to and from work by car and claimed that he had to take the tools home because the locker was not secure.

His claim was disallowed as it was not essential for the taxpayer to take his tools home. The tools could have been stored in the mesh cage. Alternatively, the taxpayer could have made his locker sufficiently secure. The driving was primarily to transport the taxpayer, and the bag was taken home because of convenience and a concern about security.

Similarly the case of Millgate v. Commissioner of Taxation [2000] AATA 1040 is also relevant in your situation. The taxpayer was a licensed aircraft mechanical engineer who transported his toolbox from home to work and back each day maintaining that security was not adequate to enable him to leave it at the maintenance base. Thefts had occurred in the past at the maintenance base. The employer did not have an alarm fitted in the storage area but did provide an area where the toolbox could be chained to steel A-frames.

When the AAT attended the work site, the taxpayer demonstrated that the chain and lock could be cut using the tools available in the general work shop area and contended that this made the area insecure. The Tribunal found that even though it was possible to cut the chain and for a toolbox to be stolen, the area was adequately secure. It stated that ‘secure area’ does not mean ‘impregnable’. The Tribunal held that as the area for storage of toolboxes at the taxpayer's workplace was adequately secure, the transport of the tools was only a matter of personal choice and therefore not deductible.

The decisions in Crestani and Ford cannot apply to your circumstances as it is considered that a secure area is provided by your taxpayer. As such the decisions in Brandon and Millgate and Case Z22 are more applicable to your circumstances. While the lockable storage area for your toolbox may not meet your personal standards for security it is a secure area and as such it is considered your transportation of the tools home is a matter of personal choice and therefore a deduction for the expenses incurred for your home to work travel are not deductible under section 8-1 of the ITAA 1997.