Edited version of private advice

Authorisation Number: 1051657782181

Date of advice: 16 April 2020

Ruling

Subject: Work-related car expenses - bulky equipment

Question

Are you entitled to claim a deduction for travel between home and work when you carry your bags for overnight stays?

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 work for Company ABC.

You travel to and from work in your own private motor car.

You are required to be away from home for extended periods of time while working on a particular job. This job requires you to work a shift of up to twelve hours which is away from your work depot. You are required to have a mandatory rest period and then start another shift of up to twelve hours as a return to depot shift. You could be away from your home for up to forty hours. You complete four or five of this particular job per month.

You carry up to three bags for overnight stays.

Bag 1 weighs approximately 7kgs and contains enough food with 2 ice bricks for approximately 6 meals.

Bag 2 weighs approximately 8kgs and contains a sleep apnea machine, change of work clothes, toiletry bag and a set of plain clothes and shoes.

Bag 3 weighs approximately 12kgs which is your work bag and contains - hat, gloves, work phone and charging gear, manuals, operational manuals & maps, safety glasses, radio, work keys and safety locks & locations and doors, wet weather gear, mini tool set, hard hat (helmet), ear muffs, head lamp & batteries cable ties for EOTS, hose bag seals, torch, ear plugs, power point board, snake bite kit, repair to wagon labels, safety labels, next to go labels, sunscreen, 3 books, winter work jacket at throughout winter, antibacterial wipes and disinfectant.

You also carry a 5 litre water container.

Storage lockers are provided at your home work site.

Water is available from your home work site to take on jobs.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Summary

Secure storage for most of your work-related equipment is available at your home work site. The remaining work-related items you are required to carry (that can't fit into a locker) are not of a size and weight that makes them bulky and you have not fully satisfied the criteria of transporting bulky goods essential for work. Therefore you are not entitled to claim a deduction for your motor vehicle expenses for carrying your equipment and personal belongings between home and work.

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.

Generally, travel between a taxpayer's home and place of work is considered to be private and domestic in nature and the cost of such travel is not deductible under section 8-1 of the ITAA 1997. This is an established principle of law (Lunney v. Commissioner of Taxation [1958] ALR 225;1958 - 0311H - HCA;100 CLR 478;(1958) 11 ATD 404;(1958) 32 ALJR 139).

One of the exceptions to this general principle is when an employee is required to transport bulky equipment necessary for their employment. In such cases, a deduction for the cost of transporting that bulky equipment may be available provided some other requirements are met. However, this exception is construed by the Commissioner as a narrow exception (paragraph 73 of Taxation Ruling TR 2019/D7 Income tax: when are deductions allowed for employee's transport expenses).

The basic requirements for a deduction to be allowed for the cost of transporting bulky equipment between a taxpayer's home and their place of work are detailed in paragraphs 63 and 64 of Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses.Essentially the basic requirements detailed in the paragraphs referred to are:

·         the equipment being transported is bulky,

·         the equipment is not being transported as a matter of convenience or personal choice, and

·         there is no secure storage for the equipment at the workplace.

For a deduction to be allowed the equipment must first be shown to be bulky. There is no definition in the tax law as to what constitutes bulky equipment so case law must be taken into account when considering this issue.

In FC of T v Vogt 75 ATC 4073 (Vogt's case), the taxpayer was a musician who kept his instruments and related equipment at home for storage and practice. He would generally transport all of his instruments, including an acoustic bass and electric bass (each with their own amplifying equipment), trumpet and flugel horn, to each place of performance. It was found that his instruments were 'bulky' in the sense that it was impractical to transport them to the venue other than by car, and that storage at home was justifiable in the absence of a reasonable alternative and because of the taxpayer's need to practice.

In particular, the following three matters were considered to be relevant in determining that the expenditure was incurred in the course of earning his assessable income (at 75 ATC 4078):

·         Firstly, the expenditure was incurred as part of the operations by which the taxpayer earnt his income.

·         Secondly, it was essential to the carrying on of those operations: there was no other practicable way of getting his instruments to the places where he was to perform.

·         Thirdly, in a practical sense, the expenditure should be attributed to the carriage of the taxpayer's instruments rather than to his travel to the places of performance.

In Crestani v. FC of T 98 ATC 2219; 40 ATR 1037 (Crestani's case) it was found that a tool box containing an aircraft engineer's specialist tools was bulky and a deduction for the cost associated with transporting that tool box between the taxpayer's home and place of work was allowed. Nothing else was being transported (at least in terms of the claim for a deduction on the basis of transporting bulky equipment).

Although not particularly large, the tool box in Crestani's case was found to be 'bulky' because it was heavy (it weighed approximately 27 kilograms) and therefore was cumbersome and not easily portable. The Tribunal found that rather than bulkiness being determined by the size of an object, the term was more aptly applied to something that was 'cumbersome in the sense that it was not easily portable'. The tool box qualified because although it was small, it was heavy and difficult to carry.

An important factor in the decision in Vogt's case and Crestani's case was that the tools being transported were essential to the taxpayer's work. As discussed below, this has been a critical factor in several decisions on this issue, including those made by the Tribunal in Case 43/94 94 ATC 387 and more recently in Sciberras and Commissioner of Taxation [2011] AATA 509 (25 July 2011).

In Case 43/94 94 ATC 387, a member of the Royal Australian Air Force was denied a deduction for the cost of transporting bulky equipment to and from his place of work in his private vehicle. This case involved the taxpayer transporting up to three bags of varying weights and sizes to place of work which contained work-related 'flying gear', as well as items of a personal nature, including civilian clothing. The flying gear was always packed in one particular bag (a duffle bag) and in making a decision about the deductibility of the expense claimed, the Tribunal focussed only on the duffle bag containing the work-related equipment. The Tribunal considered that the duffle bag containing the 'flying gear' was not of sufficient size or weight to impede facile transport and the bags containing personal items and clothing were considered to be of no consequence to the issue of whether or not bulky equipment was being transported.

In Sciberras and Commissioner of Taxation [2011] AATA 509 (25 July 2011) the taxpayer was also denied a deduction claimed for the cost of transporting bulky equipment to his place of work.

Mr Sciberras was a truck driver who drove from his home to the place where he would commence his truck driving duties. He claimed a deduction for transporting bulky equipment from his home to his place of employment on the grounds that he needed that equipment to perform his duty and would take it with him in his truck. The extra equipment consisted of tools, clothing and manuals and was in addition to the Personal Protective Equipment prescribed by his employer.

In the decision handed down in Sciberras' case, Senior Member D Letcher, QC noted (Sciberras and Commissioner of Taxation [2011] AATA 509 (25 July 2011) at paragraphs 25 and 26):

A common thread in the cases where an exception to the general rule is found to exist is that the equipment is an essential part of the work being specialist tools suited to the task or items intrinsically involved in the work. In the case of Mr Sciberras the tools, clothing and manuals were not essentials used in the driving work, nor were they items without which the work could not be done, nor were they required by the contract of employment or provision of law.

The relevant exception to the general principle may be stated as follows (in the case of transport equipment) and satisfied if:

(a) It is an integral part of the income-earning activity;

(b) It is essential to the performance of the work;

(c) The expense is incurred as the only practical means of transporting it; and

(d) There is no secure alternative to transporting it.

The Tribunal found that for an item to be considered bulky in terms of it leading to a deduction for the cost of transporting it to and from a taxpayer's home and place of work, all of the above criteria must be satisfied.

The case law also makes it clear that where secure storage is provided, a deduction will not be allowed for a taxpayer's travel between home and work.

In Ford and the Commissioner of Taxation [2014] AATA 361, the AAT held that the taxpayer was not entitled to a deduction for work-related car expenses to transport essential equipment from his home to his work. The travel was denied on the basis that the work equipment being transported would fit into a secure locker provided by his employer at his work place and that his personal choice to transport equipment was not enough to displace the principle established in Lunney v FCT (1958) 100 CLR 478.

Whether secure storage is provided to an employee is a question of fact and must be determined by reference to all of the objective evidence and not just the taxpayer's opinion about the storage available. The consequences of any loss by the taxpayer may also be relevant in certain circumstances.

In Reany v FC of T [2016] AATA 672, Senior Member Walsh stated the following at paragraph 56:

Even if this were not the case, and Mr Reany was required by TCC to carry bulky tools and equipment from home to work, Mr Reany would nevertheless not be entitled to a deduction for any amount of his work related travel expenses in the 2012 year because the evidence establishes at all times during the 2012 year TCC provided him with secure storage locker at the worksite at the Wagerup Refinery. Mr Reany's view that the storage lockers were not secure is simply that, his view. It is not supported by objective evidence. As stated, the one break in that did occur at the worksite occurred after the end of the 2012 year and, further, it is unclear from the evidence whether the break-in was to workshop/shed or to the lockers within the workshop/shed.

Generally, an employee will be found to have secure storage where they are provided with a locker at the workplace which can be locked with a key or padlock to store their work equipment, and which is not accessible to members of the general public.

In circumstances where a taxpayer carries equipment between their home and their workplace despite being supplied with secure storage because they are of the view that the storage provided is not secure, a deduction for travel between their home and work will be denied. This is because the equipment is carried as a matter of personal choice rather than necessity (see paragraph 28 of Ford).

Further, even if the secure storage area provided is not large enough to accommodate all of the equipment that is essential to the taxpayer's income earning activities, a decision to carry all of that equipment instead of storing what fits into the locker will also be treated as a matter of personal choice rather than necessity.

If an employee has secure storage available, there is no need to consider the other factors.

Accordingly, determining whether a taxpayer is required to carry bulky equipment in order to carry out their duties requires consideration of whether there is secure storage available to the taxpayer, whether the items being carried are actually necessary for carrying out the taxpayer's duties and whether the items that are necessary are bulky, such that the transportation is attributable to the carriage of those items rather than the taxpayer themselves.

Application to your situation

In your case, you occasionally travel overnight for work. You carry three bags which contain a variety of work-related and private items.

We have considered your assertions and explanations. We have also determined which items are work-related (and if they are bulky) and which items are private. The availability of water and storage lockers was also considered.

Our decision is based on the following:

Bag 1 weighs approximately 7kgs and contains enough food with 2 ice bricks for approximately 6 meals.

Food and drink is generally a private expense and not deductible. However, expenditure on food and drink is deductible when you travel away overnight for work purposes. As you generally do travel away from your home overnight for work purposes, we have taken the food you carry into account in determining whether the items you are required to carry are bulky. On their own, the contents of this bag are not considered to be bulky.

Bag 2 weighs approximately 8kgs and contains a sleep apnea machine, change of work clothes, toiletry bag and a set of plain clothes and shoes.

We have considered your medical assessment documents relating to your sleep apnea condition. However, a sleep apnea machine is a private item that you use (regardless of whether you are working) because you have a medical condition. It is not an item that you use for your work and therefore is not essential to the performance of your duties. A letter from an employer stating an individual needs something to do their job does not automatically mean that it is an allowable deduction or essential to the individual's duties. As your sleep apnea machine is a private item that you don't use in the performance of your duties, it has not been taken into account in determining whether you carry bulky equipment.

As you generally travel away from home overnight, a change of work clothes and a toiletry bag have been taken into account in determining whether you are carrying bulky equipment. Even when these items are added to the contents of Bag 1, they are not considered to be bulky.

A set of plain clothes and shoes are private items that you don't use to perform your duties. As such, they have not been taken into account in determining whether you carry bulky equipment.

Bag 3 weighs approximately 12kgs which is your work bag and contains - hat, gloves, work phone and charging gear, operational manuals & route maps, safety glasses, radio, work keys and safety locks for all rail corridors & locations and doors, wet weather gear (coats & pants), mini tool set, hard hat (helmet), ear muffs, head lamp & batteries cable ties for EOTS, hose bag seals, torch, ear plugs, power point board, snake bite kit, repair to wagon labels, safety labels, next to go labels, sunscreen, 3 books, winter work jacket at throughout winter, antibacterial wipes and disinfectant.

We acknowledge that all of the items in Bag 3 are work-related and would be used to perform your duties. However, secure storage in the form of lockers is clearly available at the depot. You contend that the storage lockers are not sufficient to hold your items and equipment. However, you do have the option to store a large number of the work-related items in the available secure lockers. You are choosing to carry these items between your home and the depot instead of leaving them in a secure storage locker. It is your personal choice to store the items at home and you therefore carry them as a matter of convenience. As such, the remaining items that don't fit into the storage locker are not considered to be bulky (even when paired with the work-related food and drink items in Bag 1).

5 litre water container

While we understand that it may be inconvenient and difficult to refill water containers at your home depot, the fact that drinking water is provided at the depot kitchen means that you are re-filling them at home as a matter of choice and convenience. As a result, the weight of your empty 5 litre water container (along with all the other work-related items) is not significant enough to determine that you are carrying bulky equipment.

Conclusion

After giving consideration to the criteria noted above, the information provided by you and your assertions, it is determined that you have not fully satisfied the criteria of transporting bulky goods essential for work.

Therefore you are not entitled to claim a deduction for your motor vehicle expenses for carrying your equipment and personal belongings between home and work.