Edited version of private advice

Authorisation Number: 1051669931432

Date of advice: 01 May 2020

Ruling

Subject: Accommodation expenses

Question

Are you entitled to a deduction for the costs associated with renting a property as a work related expense under Section 8-1 of the Income tax Assessment Act 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 are a professional who is doing further training.

As part of your training, you are required to rotate through various locations for experience and study.

You were rotated to a location on a temporary full time contract 20XX to 20XX.

You reside with family (and where pay mortgage), which is XXXkm from the work place.

You paid $XX in rent for an apartment opposite the workplace to be closer and ensure meet the required minimum break in between shifts.

No reimbursement received from your employer.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 subsection 124-75(3)

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.

The issue of expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location was considered in FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 (Toms' Case). In Toms' Case, the taxpayer was a forest worker who during the working week lived in a caravan in a bush camp 108 kilometres from his family home in Grafton. He claimed it was too far to travel each day to his work in the forest, so that it was necessary to establish a caravan at the camp. He would return home on weekends. He claimed the costs of maintaining his caravan and other living expenses such as the cost of heating and lighting. The Federal Court held that the expenses incurred in relation to the temporary

Accommodation near the workplace while maintaining a family residence in another location were dictated not by his work but by private considerations, and therefore were not deductible.

In your case, you incur expenses for renting accommodation to enable you to complete your further training, in a different town to where your principal residence is. However, as in Toms' Case, the expenses are a prerequisite to the earning of assessable income. They are incurred in order to enable you to earn income but are not incurred in the course of gaining or producing that income. Therefore, the accommodation expenses are not an allowable deduction.

Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business discusses circumstances in which self-education expenses are allowable as a deduction under section 8-1 of the ITAA 1997. If a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction. In addition, if the study of a subject of self-education objectively leads to, or is likely to lead to, an increase in a taxpayer's income from his or her current income-earning activities in the future, the self-education expenses are allowable as a deduction.

However, the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 establishes the principle that no deduction is allowable for self-education expenses if the study is to enable the taxpayer to get employment, obtain new employment or to open up a new income-earning activity (whether in business or the taxpayer's current employment). This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

In your case, the fact that you are doing further study, is not a sufficient basis in itself for self-education expenses to be deductible. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. Therefore, you are not entitled to a self-education deduction.

In summary, based on your accommodation expenses being a prerequisite to earning your income, and you are opening a new income stream, you are not entitled to a deduction for your rental expenses.

ATO view documents

Taxation Ruling TR 98/9