Edited version of private advice

Authorisation Number: 1051623190986

Date of advice: 26 February 2020

Ruling

Subject: Travel expenses

Question

Are the travel expenses incurred in the relevant period an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

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

You were employed under contract as a casual employee.

You were engaged to deliver various services at the employer's facility.

You received remuneration for the time spent preparing and delivering the relevant materials.

You prepared work materials at home.

You were paid a set amount depending on the type of service you were providing.

The travel expenses include the cost of travelling between your home and workplace and the cost of a parking permit.

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 in nature.

The expenses of travelling between home and a place of work are generally not deductible as these expenses are of a private nature (Lunney v. FC of T (1958) 100 CLR 478 (Lunney's Case)).

Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses and TR 2019/D7 Income tax: when are deductions allowed for employees' transport expenses? discusses the deductibility of travel expenses

Paragraph 77 of TR 95/34 states:

A deduction is generally not allowable for the cost of transport by an employee between home and his or her normal work place as it is generally considered to be a private expense. The cost of travelling between home and work is generally incurred to put the employee in a position to perform duties of employment, rather than in the performance of those duties.

However the cost of travel between home and work may be allowable in certain limited situations where:

·         The employee's home constitutes a base of employment and travel is between two places of employment;

·         The employee's work is inherently of an itinerant nature;

·         The employee has to transport by vehicle bulky equipment necessary for employment

Home as a base of operations

Travel expenses are deductible where an employee travels between home based employment and another place of employment. However, the fact that the employee chooses to perform work at home associated with employment conducted elsewhere is not sufficient for the home to constitute as a base of operations.

Paragraph 56 of TR 95/34 states that an employee's home may constitute a base of operations if the work is commenced at or before the time of leaving home to travel to work and the responsibility for completing it is not discharged until the taxpayer attends at the work site. Whether an employee's home constitutes a base of operations depends on the nature and the extent of the activities undertaken by the employee at home.

In the Federal Court Case FC of T v. Collings 76 ATC 4254; (1976) 6 ATR 476 it was held that the taxpayer, a computer consultant was allowed the expenses of travel between home and work as;

a)    she had commenced performance of her duties before leaving home and travelled to work to complete those duties. Her obligation was more than just being on stand-by duty at home; and

b)    she did not choose to do part of the work in two separate places. The two places of work were a necessary obligation arising from the nature of the special duties of her employment.

TR 2019/D7 also addresses situations where an employee works from home. Paragraphs 69 and 72 of that Ruling state:

The mere fact that an employee undertakes some work duties at home at their convenience does not make expenses of travel to their regular place of work deductible. This is because the travel itself is not explained by the employment duties and is thus not part of the employment. This treatment will not change even if the travel occurs during work hours. Moreover, travel from home to a regular place of work in this situation is still explained by where an employee chooses to live in relation to their regular place of work, which is a private or domestic matter. It does not matter whether the work at home occurs informally or as part of a regular arrangement with the employer.

Where an employee has an area of their home set aside as their sole base of operations because their employer provides them with no other location to work from, that area of their home becomes their regular place of work. Such an employee will be entitled to a deduction for expenditure incurred in travelling to perform their duties, such as travel to a client's premises.

As an employee lecturer your duties do not commence until you reach the school.

Under a clause of the enterprise agreement it states you are entitled to have reasonable access to the employer's facilities.

Although you may take work home, it is not a necessary obligation arising from the duties of your employment that you carry out work at home. You undertake your work at home for convenience. Accordingly your home is not considered as a base of employment.

This is in contrast to Administrative Appeals Tribunal (AAT) Case QT86/3169 and Commissioner of Taxation [1988] AATA 339; (1988) 20 ATR 3135; 89 ATC 133 where it was held that the travel expenses were an allowable deduction.

In that case the taxpayer was required to travel 180km, which included railway travel, to their place of employment which was located in a different city and deliver lectures within a short period of time at two different locations. In making the decision, it was specifically noted that the employer had made no provision for the taxpayer to perform the preparatory work required to deliver the lectures and therefore the work conducted at home was not a matter of convenience, but necessity.

Itinerant work

The question of whether an employee is itinerant is one of fact, to be determined according to individual circumstances. It is the nature of each individual's duties and not their occupation or industry that determines if they are engaged in itinerant work. The main features of itinerant work specified in TR 95/34 include:

·         Travel is a fundamental part of the employee's work.

·         The existence of a web of work places in the employee's regular employment, that is, the employee has no fixed place of work.

·         The employee continually travels from one work site to another. An employee must regularly work at more than one work site before returning to his or her usual place of residence.

·         The employee has a degree of uncertainty of location in his or her employment (that is, no long-term plan and no regular pattern exists).

In FC of T v. Wiener 78 ATC 4006; (1978) 8 ATR 335 (Wiener's case), a teacher was required to teach at a minimum of four different schools ('web' of work places) each day, and comply with a strict timetable that kept her on the move throughout each of these days. The Supreme Court of Western Australia, concluded that travel was inherent in her employment because the nature of the job itself made travel in the performance of her duties essential. It was a necessary element of her employment that on those working days she has to transport herself to whichever school she commenced her duties and was required to transport herself between different schools on those days.

In contrast to Wiener's case, you are not required to travel between a 'web' of work places on a daily basis. In your case, your regular place of employment is at the employer's facility and travel is not a fundamental part of your work. Therefore you are not engaged in itinerant work and cannot be considered as an itinerant worker.

Transport of bulky equipment

Paragraph 62 of TR 95/34 states that a deduction may be allowable if the transport costs can be attributed to the transportation of bulky equipment rather than to private travel between home and work (see paragraph 73 of TR 2019/D7 and paragraph 62 of TR 95/34). It is construed by the Commissioner as a narrow exception to the ordinary principle that travel from home to a regular place of work is private and thus not deductible. To come within the exception it is necessary that:

·         the equipment is essential for the performance of the employee's employment duties

·         the equipment is bulky such that transportation by car or other private vehicle is the only realistic option

·         transporting the items to and from their regular place of work is a practical necessity because there is no secure area for the storage of the equipment provided at the employee's regular place of work or the equipment needs to be transported to a different site each day.

If the equipment is transported to and from work by the employee as a matter of convenience or personal choice, it is considered that the transport costs are private and no deduction is allowable.

Paragraph 138 of Taxation Ruling TR 95/14 specifies that an employee teacher is not entitled to a deduction for transport costs if, as a matter of convenience, work is performed at home and items such as papers, books and material (whether bulky or not) are transported between home and work for that purpose. In Case Q1 83 ATC 1; (1983) 26 CTBR (NS) Case 65, the use of a car by a school principal in these circumstances was treated as private use as it was travel from home to the place of employment.

In view of the above, you do not meet any of the limited exceptions which would allow you to claim a deduction for the expenses you incur in travelling between your home and the employer's facility. Your home does not constitute a base of employment, you are not engaged in itinerant work and your transport costs are not attributed to the transportation of bulky equipment. Your travel expenses between home and work are not incurred in the course of gaining or producing your assessable income. They are incurred to put you in the position to earn your income and are private in nature. Therefore you are not entitled to claim a deduction for the travel expenses between your home and work under section 8-1 of the ITAA 1997.