Edited version of your written advice

Authorisation Number: 1051376053563

Date of advice: 25 May 2018

Ruling

Subject: Work related expenses – accommodation, meal and incidentals

Question

Can you deduct accommodation, food and incidental expenses while working away from your primary place of residence?

Answer

No

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Your primary place of residence is in City A.

You were offered a contract in City B, the 20XX-XX income year.

The position was approximately Xkm away from your primary place of residence.

You were considered a contractor.

You commuted to City B five days a week and returned home on the weekends. This amounted to a number of days living away from your home.

You did not receive any allowances.

You stayed at a friend’s home while working in City B except for three days which you stayed at a hotel.

You incurred expenses for accommodation, meals and incidentals.

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 an 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.

As discussed in Draft Taxation Ruling TR 2017/D6 Income tax and fringe benefits tax: when are deductions allowed for employees' travel expenses? expenditure for accommodation, meal and incidentals is of a private or domestic nature. This includes the ordinary costs of maintaining a home and consuming food and drink to go about their daily activities, such as to attend work. These costs are preliminary to the work, and are not incurred in the course of performing those income producing activities. Likewise, where accommodation, meal and incidental expenses are incurred in relocating to a place of work or in living away from home to work, they are preliminary to the work and not deductible. The private or domestic nature of these expenses often reflects a choice the taxpayer has made. This includes a taxpayer’s choice about where to live. While the Taxation Ruling makes references to employees, the same principles apply to a contractor.

In addition to the draft taxation ruling, the Federal Court decision in FC of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466, held that expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location, were not an allowable deduction as they were considered to be private expenses. Although the expenditure must be incurred in order to put one in a position to be able to derive assessable income, it does not necessarily mean that the expenditure is incurred in the course of gaining or producing that income.

In your case, the accommodation, meal and incidental expenses are incurred to enable you to stay in the proximity of your work location in City B which is due to a choice about where you live and work. They are not expenses incurred in the course of gaining or producing your assessable income. Consequently you are not entitled to a deduction for accommodation, meal or incidental expenses in City B under section 8-1 of the ITAA 1997.