Edited version of your written advice

Authorisation Number: 1051490742894

Date of advice: 11 April 2019

Ruling

Subject: Living away from home for work

Question

Are you entitled to a deduction for accommodation and meal expenses while living away from home for work?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2018

The scheme commenced on

1 July 2017

Relevant facts and circumstances

Your principal place of residence is in State X.

You received a letter of offer and entered into a contract with your employer.

You then worked in City A which is not located in State X.

A contractual condition was that your employer would pay for travel costs, including flights where required.

Your employer paid for all flights.

Whilst working in City A you paid for accommodation, and you have receipts for this.

Your contract set out a four weeks on and one week off work roster.

You have provided a record of payment showing the annual break up of your salary and hours worked.

An amount of $XX,XXX was shown on this statement as LAFHA (Living Away From Home Allowance), however this was shown as a gross amount with a net amount indicated after tax was withheld.

Your fortnightly payslips show a gross income amount and a net amount after tax was withheld from the total gross amount. No LAFHA was shown separately, and your payment summary from this employer for the 2018 financial year indicates only total gross payments and total tax withheld.

Your employer has stated that they did not pay you a LAFHA as payment of a LAFHA was not outlined in your employment contract and your rate of pay took into account that you had to pay for your own accommodation in City A.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for Decision

Summary

You temporarily relocated to an interstate location to work. The expenses you incurred for accommodation and meals while living away from home are of a private nature. Also, 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; therefore, they are not deductible.

Detailed reasoning

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 outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.

Accommodation expenses are ordinarily not deductible as they are private and domestic in nature.

An exception is where a taxpayer is travelling in the course of performing their work duties, for example, an interstate truck driver who travels away from home overnight. In these types of cases, the accommodation, meal and incidental expenses incurred while the taxpayer is travelling are incidental to the proper carrying out of their employment function and cease to be of a private and domestic nature.

However, it is important to distinguish taxpayers who travel in the course of carrying out their employment duties from taxpayers who are living away from home. In the latter case, the taxpayer moves and takes up temporary residence away from their usual place of residence so as to be able to carry out employment duties for a time at the new (but temporary) workplace.

For taxpayers who are living away from home, there is a change of job location and a temporary change of residence to a place at or near that location. For example, an employee who is transferred for three months to an office in another city and takes up temporary accommodation in that city whilst maintaining their own usual place of residence would be in this category. In this type of situation, the accommodation, meal and incidental expenses incurred while the person is living away from their usual home do not cease to be private and domestic in nature. That is, they are considered to retain their character as living expenses rather than becoming work related expenses.

Miscellaneous Taxation Ruling MT 2030 discusses the difference between travelling on work and living away from home for work. It states that taxpayers who are travelling on work normally do so for comparatively short periods.

In your case, you were working in City A for a substantial period. It is considered that for this period you were living away from home for work rather than travelling on work. That is, it is not considered that travel was a part of your actual work duties. Rather, your work location had changed and you chose to take up temporary residence near your new work location. Therefore, your accommodation expenses are considered to retain their character as living expenses. As these expenses are private and domestic in nature, a deduction is not allowable.

This is supported by the decision in Federal Commissioner of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466 (Toms Case), where the Federal Court 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.

Your circumstances are considered to be comparable to those in Toms’ case. From the information provided it is clear your place of employment was in City A and you have made a choice to move away from your family home in State X to work in City A. Any accommodation and meal expenses you may incur to stay in City A will be incurred to put yourself in a position to perform your duties and not in the actual performance of those duties. Also, your accommodation and meal expenses are considered to be of a private or domestic nature. Consequently, these expenses are not deductible under section 8-1 of the ITAA 1997.

Additional information

In your private ruling application you asked whether you could claim a deduction in relation to a LAFHA if it was included in your gross income instead of listed as an allowance.

Whether or not you received a separate LAFHA or your gross income was increased to include an equivalent amount makes no difference to whether or not you are entitled to a deduction for expenses incurred in living away from home for work.

In both situations the expenses are not deductible as they would still be considered to be private in nature and also not incurred in the course of producing your assessable income (as discussed further above).

Although whether or not you received a LAFHA makes no difference to the deductibility of expenses incurred in living away from home for work, it does impact on how much income is included in your assessable income.

This is because a LAFHA is exempt from tax for the employee but is subject to fringe benefits tax (FBT) for the employer.

Your employer has stated that they did not pay you a LAFHA as payment of a LAFHA was not outlined in your employment contract and your rate of pay took into account that you had to pay for your own accommodation.

If you wish to pursue the belief that a LAFHA was paid to you, that will be an issue between you and your employer.