Edited version of private advice

Authorisation Number: 1051610813576

Date of advice: 25 November 2019

Ruling

Subject: Income Tax - deductions

Question

Are you entitled to claim deductions for travel and home office expenses relating to the duties you perform for a not for profit organisation in your 20XX tax return?

Answer

No.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You have a regular job engaged as a professional of a kind not related to your volunteer work.

You are XXXX for a not for profit organisation.

The duties you perform for the not for profit organisation include answering emails from the community, vets and other organisations. You arrange de-sexing of animals and arrange foster carers and adoptions. You also transport animals to and from foster carers as well as completing trips to and from the vet for de-sexing.

You undertake work for the not for profit organisation in your home study. You also incur travel expenses.

You have not been paid anything from the organisation in the 20XX financial year.

You are looking to be paid a small amount (mainly reimbursements) at the start of 20XX. Reimbursements will be for travel and out of pocket expenses (food for animals, formula, emergency vet bills).

In 20XX, if the organisation is making enough money, you expect your receipts to increase to include hours worked. You expect to receive approximately $X a month to start.

You do not have an employment contract with the not for profit organisation.

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 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.

A number of significant court decisions have determined that for an expense to be an allowable deduction:

·         it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense (Lunney v. FC of T; (1958) 100 CLR 478),

·         there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income (Ronpibon Tin NL v. FC of T, (1949) 78 CLR 47), and

·         it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income (Charles Moore Co (WA) Pty Ltd v. FC of T, (1956) 95 CLR 344; FC of T v. Hatchett, 71 ATC 4184).

Working from home and travel expenses are generally deductible under section 8-1 of the ITAA 1997 where they have the necessary connection to your current income earning activities.

However, in your case, you have not received any income in the 20XX financial year and therefore you have not satisfied the points above.

You are not an employee of the organisation, you do not have an employment contract and you have not received any income. To claim a work-related deduction for home office and travel expenses "it must directly relate to earning your income".

At this point in time, until you sign an employee contract with the organisation or until you receive payments (other than reimbursements) you will be seen to be a 'volunteer'.

Although there is no legal definition of 'volunteer' for tax purposes, a volunteer does not work under a contractual obligation for remuneration and would not be an employee or independent contractor. So, if workers are not employees or independent contractors, they will be volunteers.