Edited version of your written advice

Authorisation Number: 1051346517365

Date of advice: 7 March 2018

Ruling

Subject: Deduction for travel expenses

Questions and answers

1. Are you entitled to a deduction for your motor vehicle expenses to travel between your home and work sites?

No.

2. Are you entitled to a deduction for travel expenses you incurred when travelling between two different work sites in the one day?

Yes.

This ruling applies for the following period(s)

Year ended 30 June 2017

The scheme commences on

1 July 2016

Relevant facts and circumstances

In 2016/17 you were employed by several agencies where they would enter a contract to provide services.

You accept work as is available from each agency and in some weeks you will be working for two agencies at two work sites or one agency at two work sites.

You submit time sheets that, when approved by the relevant agency, provide the basis for the agency to pay your wages.

All agencies treat you as an employee, withholding PAYG and pay super guarantee.

The time sheets itemise the time spent at the relevant work sites.

From home, you contact people and write up the reports which is also itemised in the time sheets.

At home, you set your own hours and may work several hours some days and X minutes another day depending on what needs to be done.

You have never worked at the office of any of the agencies. They do not provide facilities and there is an explicit expectation that you will work from home. You might visit an agency when a new coordinator is appointed and will meet some of the recruitment agency staff when there is a social occasion.

In a particular year, you could do X jobs at numerous worksites.

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 or outgoing to the extent to which it is incurred in gaining or producing assessable income, except where the loss or outgoing is of a capital, private or domestic nature, or relates to the earning of exempt income.

Travel expenses

In considering the deductibility of travel expenses, a distinction is made between travel to work and travel on work. It is only if the duties of the job require a taxpayer to travel that the taxpayer's expenses can be deducted.

In general, a deduction is not allowable for the cost of travel by an employee between their home and their normal workplace as it is considered private in nature. Taxation Ruling TR 95/34, paragraph 77 explains that the cost of such travel is incurred to put the employee in a position to perform their duties of employment, rather than in the performance of those duties.

The case, Lunney v. Commissioner of Taxation ALR 225; 1958 0311H HCA; 100 CLR 478; (1958) 11 ATD 404; (1958) 32 ALJR 139 introduced what is now regarded as the essential character test. This test requires that for an expense to be deductible, it must have the essential character of a business or income producing expense. The taxpayer in this case sought to deduct the cost of travelling from his home to his work. The expenses were disallowed as being private and domestic, establishing the broad principle that costs incurred because of living in one place while working in another cannot be regarded as deductible.

The fact that certain expenditure, such as travelling to work, must be incurred in order to be able to derive assessable income, does not necessarily mean that the expenditure is incidental and relevant to the derivation of assessable income. It is a prerequisite to the earning of assessable income rather than being incurred in the course of gaining that income.

The essential character of the travel to and from 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 what distance from work.

In your case, you have incurred expenses for travel between your home and your work sites. This travel is incurred in order to put you in a position to perform the duties of your employment; it is not incurred in the performance of the duties of your employment. As such, this travel is not a part of your actual work duties.

For the travel to be a fundamental part of an employees work, travel must be an essential feature of an employee’s duties. Your duties will only commence when you reach the work site where you carry out your work. You are not considered to be travelling in the performance of your duties from the moment you leave your home.

The travel expenses you have incurred travelling between your place of residence and work sites are private in nature. Therefore, you are not entitled to a deduction for these expenses under section 8-1 of the ITAA 1997.

Travel between two different work sites.

On the days after commencing your duties, where you are required to travel to a different work site it is considered you are travelling on work rather than to work. The travel is undertaken in the performance of your duties. Therefore where you finish work at one work site and travel directly to the next work site in order to continue your work with your employer, you will be entitled to claim a deduction for your travel expenses for this portion of your journey.