Edited version of private advice

Authorisation Number: 1051601782244

Date of advice: 5 November 2019

Ruling

Subject: Living away from home for work

Question

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

Answer

No

This ruling applies for the following periods:

Year ended 30 June 20XX to 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You have worked in the same employment for many years.

A number of years ago your employer moved your depot to City Y which is several hours travel from where you live in X.

Your employment agreement (EA) contains fatigue management protocols.

You can work at different locations in City Y.

Due to the distance your home is located from City Y, to comply with the fatigue management protocols you stay in accommodation in City Y during your rostered on days.

You previously received a living away from home allowance (LAFHA) and at times still do.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

Summary

You live in X and travel several hours to your work located in City Y. Your employer sometimes pays a LAFHA when you stay in overnight accommodation located in City Y. The additional expenses you incurred for accommodation while living away from home are private in nature. Also, these expenses are a prerequisite to the earning of assessable 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.

It is important to distinguish between taxpayers who are living away from home and taxpayers who travel in the course of performing their work duties. Travel and accommodation expenses are not deductible for the former while they are for the latter. Examples:

Travelling on work

An interstate truck driver 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. As the taxpayer is undertaking employment duties while travelling the travel expenses are deductible.

Living away from home for work

A forest worker during the working week lives in accommodation near the logging areas where they work due to the remoteness of those areas and returns home every weekend. In these types of cases 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. They are considered to retain their character as living expenses rather than becoming work related expenses. The taxpayer takes up temporary residence away from their usual place of residence so as to be able to carry out employment duties. The accommodation expenses are incurred to put them in a position to be able to carry out their employment duties rather than in the actual performance of their employment duties. Therefore, the accommodation expenses are not deductible.

Taxation Ruling 2017/D6 discusses the difference between travelling on work and living away from home for work. It states that a LAFHA benefit is in the nature of compensation to the employee for additional expenses incurred by the employee by reason that the employment duties require them to live away from home. Paragraphs 15 and 16 say:

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.

Similarly, employee costs of relocating for work and living away from home to work are preliminary to the work and are not deductible.

In your case, you work in different locations surrounding City Y and you choose to live in X. It is considered that for the periods you sleep in nearby accommodation close to your workplace, the accommodation does not lose its character of being private and domestic in nature. The travel and accommodation is not in the proper course of carrying out your employment functions.

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 you originally worked in Z and live in X. Your work was relocated to City Y and you remained living in X, which was further distance and travelling time to City Y. Any accommodation expenses you incur to stay in accommodation in City Y will be incurred to put yourself in a position to perform your duties and not in the actual performance of those duties.

The accommodation expenses are considered to retain their character as daily living expenses and are of a private or domestic nature. Consequently, these expenses are not deductible under section 8-1 of the ITAA 1997.