Edited version of private advice

Authorisation Number: 1051635798103

Date of advice: 13 February 2020

Ruling

Subject: Work related travel expenses

Question

Can you claim weekly car related travel expenses to travel to and from a remote location to provide clinical services where you are provided with paid overnight accommodation?

Answer

No. The nature of the travel undertaken is considered to be private in nature. Therefore, you are unable to claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)

This ruling applies for the following period:

Year ending 30 June 2020

The scheme commences on:

Commenced on 1 July 2019

Relevant facts and circumstances

You are a General Practitioner (GP) who provides clinical services. You are registered as a sole trader business. You are also registered for Goods and Services Tax (GST).

You are renting your primary residence in XXXX. Your primary medical qualification is from the XXXX. You are subject to XXXX of the XXXX Act XXXX (The Act). Under XXXX of The Act, you are under a XXXX year moratorium which means you can only attract Medicare - rebatable GP services if you work in a Distribution Priority Area (DPA).

DPA boundaries were updated in 2018. The majority of XXXX is now no longer classified as a DPA area.

Opportunities to work in non-DPA clinics through a 6 month locum exemption are limited as clinics prefer to take GPs who don't have any restrictions and can continue patient care beyond 6 months.

You have been taking on short-term locum contracts further away from XXXX to cover staff shortages in DPA clinics.

You have taken up a contract (The Contract) with the XXXX Health Network. You commenced The Contract on XXXX 2020.

You are contracted under your ABN to provide GP services to the local Aboriginal community via their clinic at XXXX Hospital. XXXX Hospital is approximately 216 kilometres from XXXX.

The Contract is for 6 months duration with the option to extend.

The clinic is a DPA clinic so the process of getting Medicare approval was very easy.

This Contract is the only contract you have.

You are expected to service the clinic every Monday and Tuesday from 8.30 am to 4.30 pm.

The XXXX Health Network provides paid overnight accommodation for 2 nights in the form of a hotel or bed and breakfast as the commuting distance and time to travel from XXXX is too great.

You drive from your home in XXXX to the hotel in XXXX on Sunday nights. You then work Monday in XXXX and spend Monday night in paid hotel accommodation.

When you complete work on Tuesday evening, you drive back from the XXXX clinic to your home in XXXX.

You don't receive any fuel or car allowances from the organisation for your travel to and from XXXX.

You have commenced keeping a log of your trips with the ATO application on your phone through the log book method.

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, or relate to the earning of exempt income.

A deduction is not generally allowable for the cost of travel between home and work as it is considered a private expense. Expenditure incurred in travelling to work is a prerequisite to the earning of assessable income rather than being incurred in the course of producing that income.

The travelling expenses in your situation are incurred as a consequence of living in one place and working in another. That is, the essential character of the expenditure is of a private or domestic nature, relating to personal and living expenses and therefore not an allowable deduction (Lunney's case and Federal Commissioner of Taxation v Cooper (1991) 29 FCR 177; 91 ATC 4396; 21 ATR 1616).

Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example unless a person arrives at work it is not possible to derive income. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income. Rather, the expenses are incurred to enable the taxpayer to commence income earning activities (Lunney's case and Case V111 88 ATC 712).

The essentially private character of travel between home and work is not affected by factors such as the time of travel, the distance of travel and the necessity of travel (Taxation Ruling IT 2543). In your situation, although the distance you travel is approximately 216 kms from your main residence, it is still considered that this travel is private in nature.

Taxation Ruling TR 2017/D6 paragraph 54 provides that there may be some instances where expenses may be considered to be incurred in the course of performing an employee's duties but only where: the employee's work activities require them to undertake the travel

a) the work requires the employee to sleep away from home overnight

b) the employee has a permanent home elsewhere, and

c) the employee does not incur the expenses in the course of relocating or living away from home.

In your case your travel to City B is not considered to be work related travel. It is considered that City B is your normal place of work. While it is acknowledged that your main residence is in City A, it is not considered that your travel between City A and City B is work related travel. Rather, it is private travel carried out to enable you to commence your employment duties. The distance of the travel does not alter the private nature of the travel.

As City B is your normal place of work, your travel is not associated with any work related travel. Therefore, no deduction for travel expenses is allowable under section 8-1 of the ITAA 1997.