Edited version of private advice

Authorisation Number: 1051613192174

Date of advice: 6 December 2019

Ruling

Subject: Claiming deductions for travel, accommodation, meals and incidental expenses

Question 1

Are you entitled to claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for travel expenses incurred when travelling between your home office, which is a 'place of business' and your primary work location, to non-primary work locations?

Answer

Yes. Based on the information provided, you are required to travel between your home office, which is a 'place of business' and your primary work location and your employer's head office in accordance with your employment agreement. The travel is attributable to you having co-existing work locations. Under the terms of your employment agreement you are also required to travel to locations around your primary work location and the surrounding areas in order to service existing clients and seek out new client opportunities. Therefore, you are entitled to claim a deduction for the transport expenses you incur (and which are not reimbursed) under section 8-1 of the ITAA 1997.

Further information about claiming deductions for travel expenses can be found by searching 'QC 31982' on ato.gov.au.

Question 2

Are you entitled to claim a deduction under section 8-1 of the ITAA 1997 for accommodation expenses incurred while working away from home at non-primary work locations?

Answer

Yes. Based on the information provided, you are required under the terms of your employment agreement to carry out your employment duties at your home office, which is a 'place of business' and your primary work location, and at your employer's head office. When you travel to your employer's head office you are required to stay away from your home overnight. You stay in an apartment that you have sub-leased which you will not use for private purposes. As you stay away from home overnight in the course of performing your duties, you have co-existing work locations and the rent on the apartment is not disproportionate to what you would have paid for suitable commercial accommodation, you are entitled to claim a deduction for your accommodation expenses under section 8-1 of the ITAA 1997.

Further information about claiming deductions for accommodation you rent can be found by searching 'QC 50760' on ato.gov.au.

Question 3

Are you entitled to claim a deduction under section 8-1 of the ITAA 1997 for meal and incidental costs you incur while working at non-primary work locations?

Answer

Yes. Based on the information provided and for the reasons set out in question 2, you can claim a deduction for your meal and incidental costs under section 8-1 of the ITAA 1997 during the periods you are working at your employer's head office.

Further information about claiming deductions for meals and incidentals can be found by searching 'QC 31982' on ato.gov.au.

This ruling applies for the following period

Income year ending 30 June 20XX

The scheme commences on

1 October 20XX

Relevant facts and circumstances

You and your spouse are directors of a corporate trustee which purchased a property (the Property) located in a rural city (City X).

You are a Principal of an accounting firm (Company A) which operates out of its head office located in a major city.

Company A provides tax and compliance services, business coaching and self-managed superannuation fund advice principally to small to medium enterprises, with clients located across Australia.

Company A merged with another accounting firm. Planning discussions by Company A during the months prior to the merger when the following had been raised:

·         Medium X year - have offices in X locations; and

·         Long term X years - have offices in X locations.

One of Company A's core strategies is the expansion of its client base in regional area of the state in which its head office is located.

Company A has X owners, and does not have a formal written business plan. Most decisions tend to be made in meetings, which are not always minuted.

One of Company A's largest client, by fees, is based in City X with the remainder of its clients being located in the city where their offices are located.

You have agreed to relocate City X to service Company A's existing regional clients located in the same state, and to further develop their client base which will involve travelling to clients, undertaking business development meetings, client meetings, telephone calls, emails and computer activities.

A house was constructed on the Property which as an office located in it. The office has its own entrance and is connected to the rest of the house via the garage. The office will not be used for any private use, with a study to be set up in one of the bedrooms of the house for non-Company A related activities.

You recently relocated your family to City X and moved to the Property.

You have retained your executive leadership role at Company A which requires you to regularly attend partners meetings, overseeing the production of accounting work, managing the business of the partnership and meeting with staff in the head office.

You and Company A have agreed that you will be present in the head office for a specified number of days every fortnight. Additionally, you will be required to undertake travel to other locations across the state in which the head office is located, in Australia, or internationally as required.

You will sub-lease part of an apartment near the head office for use during the periods or work in Sydney under which you will be entitled to the exclusive use of a bedroom and shared use of other facilities estimated to cost $XX per week.

You will not use the apartment for private purposes and your spouse and children will reside permanently at the Property.

Your family will not accompany you to the city in which the head office is located when you are undertaking your work activities for Company A.

You entered into an employment agreement (the Agreement) with Company A (the Employer) which includes the following information:

2. Appointment

The Employer appoints you, and you agree to serve, in a full-time position specified in Schedule 1 or such position as the Employer appoints you to from time to time. The Employer may require you to perform other reasonable duties or work in other positions from time to time on a permanent or temporary basis

2.3  The location of your work will be as outlined in Schedule 1, however the Employer may direct you to perform your duties at other location either temporarily or permanently

2.4  You will be required to undertake travel as part of your duties. In particular:

(a)  from your primary work location outlined in Schedule 1 to the Employer's head office for X days per fortnight

(b)  you will be required to travel to other locations in Australia and overseas on an as-needs basis.

The Employer will meet reasonable costs of travel between your primary work location outlined in Schedule 1, and these locations.

2.5  You will report to the position outlined in Schedule 1, or another position nominated by the Employer from time to time.

2.6  This Agreement will continue to operate in relation to your employment despite any temporary or permanent change in your location, duties, position, reporting line or remuneration, until terminated in accordance with this Agreement or replace by a new agreement made in writing between you and the Employer.

5. Duties and responsibilities

5.1  You will perform the following duties:

(a)  Provide overall executive leadership and management of the firm

(b)  Provide accounting, compliance, tax advisory, coaching and other services to clients as agreed from time to time; and

(c)  Build the firm's presence in City X and a specified region in the state in which City X is located, by servicing existing clients in that region and seeking out new client opportunities.

7. Hours

7.1  You will be required to work at least XX.X hours per week.

7.2  In addition to the hours set out above, you may also be required to work reasonable additional hours which are those hours reasonable necessary to fulfil the requirements of your position or directed by the Employer. You acknowledge that working additional hours is reasonable and part of your role and that this is compensated for, and has been taken into account, in setting your Remuneration.

7.3  You may be restored to work on any day of the week, Monday to Sunday. Currently, our usual business hours are 8.30 am to 5.00 pm, but these hours may change from time to time.

14. Reasonable expenses

14.1The Employer will reimburse you for any authorised and reasonable business related expenses which you incur in the performance of your duties, subject to you providing tax receipts or other reasonable documentary evidence acceptable to the Employer.

Schedule 1

In accordance with the Agreement:

·         Company A will pay you a car allowance of $X,XXX per month to cover the anticipated costs of operating your car to service clients, and build a client base across the state in which the head office is located, specifically in a location in that state

·         Company A will reimburse the following:

-        reasonable transport expenses from the primary work location in City X to the head office, usually plane, but also by train or bus

-        transport expenses to interstate and international locations

-        accommodation, meals and incidentals for travel to interstate and other regional locations, but not for travel to the head office; and

-        costs relating to the running of the home office at the Property, including internet, phone and computer, until such time as a separate Company A office is established in City X.

·         You will pay the following:

-        accommodation, meals and incidentals relating to travel from City X to the head office; and

-        transport expenses to the extent that they are not reimbursed by Company A for any reason.

You have recently commenced working from the office located at the Property.

It is anticipated that a commercial office will be opened in City X, with a number of local employees being engaged, when the office located at the Property has been outgrown. While in City X you deal with business clients and try to undertake as many site visits and meetings as practicable. If an opportunity to sublet a suitable office space in City X occurs you will explore City X.

Company A's focus is on medium or large business client and not individuals and the opening of an office in City X will not be contingent on the number of clients. However, a trigger may be made on a fee basis, such as $XX,XXX of fees from the specified area in the state, estimated to be XX.X% of Company A's total revenue.

There is currently no signage at the Property, but it is anticipated that a 'Company A' sign will be installed at the entrance of the Property.

The Property has been listed as a contact point on two of Company A's websites, with appointments at that location available upon request.

It is anticipated that during each fortnight you will work a specified minimum number of days a fortnight in City X, travelling to the head office on specified mornings and returning to City X during the afternoon after a specified number of days and then working in City X from the following day for a specified number of days. You will work between the hours of 8.30 am to 5.00 pm in accordance with the Agreement, with a one hour break.

In your role as director you often work longer hours, including on weekends up to 10 12 hours per day.

Relevant legislative provision

Income Tax Assessment Act 1997 section 8-1