Edited version of private advice

Authorisation Number: 1051714443487

Date of advice: 12 August 2020

Ruling

Subject: Work related expenses

Questions

Are you entitled to claim a deduction under the Income Tax Assessment Act 1997 (ITAA 1997) for expenditure incurred in relation to the work related expenses below:

1.    Are you entitled to claim a deduction for car expenses between home and work when you are carrying bulky equipment for work?

Answer

Yes

2.    Are the travel expenses incurred in travelling overseas deductible?

Answer

Yes

3.    Are you entitled to a deduction for protective outdoor specific clothing and specific shoes which you purchased for your outdoor work?

Answer

Yes

4.    Are you entitled to a deduction for a portion of the decline in value of your equipment?

Answer

Yes

5.    Are you entitled to a deduction for the other work-related expenses?

Answer

Yes

This ruling applies for the following period

1 July 20XX to 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were employed as an outdoor program coordinator.

You purchased equipment and during each outdoor program you were required to transport bulky equipment in your car.

Protective clothing and footwear were required for your outdoor work.

You kept your qualifications current as required by your profession and your employer.

Your employer encouraged you to obtain professional development.

You provided a travel diary and you also provided a description of the course fees, travel costs.

You incurred the costs of the professional development activities. The employer allowed paid leave for attendance at the professional development and will not be reimbursing you for the expenses directly or through an allowance.

You have provided details of both of your employment duties and the courses.

The course content was related to your role, endorsed by your employer and you continued working in your role after the professional development activities were completed.

Relevant legislative provisions

Income Tax Assessment Act 1997section 8-1

Income Tax Assessment Act 1997section 28-25

Income Tax Assessment Act 1997Division 40

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you can deduct from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income, or is necessarily incurred in carrying on a business for that purpose. However, you cannot deduct a loss or outgoing under this section that is of a capital, private or domestic nature.

You can claim a deduction for expenses that you have incurred to earn your income, but only the amount that you have used for work, meaning that if there is any private use the deduction should be apportioned.

D1 Car expenses

A deduction is generally not allowable for the cost of travel between home and the normal workplace as it is considered to be a private expense and not incurred in producing assessable income (Lunney v Federal Commissioner of Taxation[1958] ALR 225). The cost of travel between home and work is generally incurred to put a person in a position to perform duties of employment, rather than in the performance of those duties.

As in your case, there are limited situations where it has been accepted that travel from home to work is deductible; including the transportation of bulky equipment in some circumstances. In the case of bulky equipment, the cost is attributed to the transportation of the bulky equipment rather than private travel between home and work where the transportation of the equipment is essential and is not done as a matter of personal choice or convenience and there is no secure storage provide at the workplace.

In FCT v Vogt [1975]1 NSWLR 194, the taxpayer worked at various places and his employment created the necessity to transport his musical instruments. There was no other practical way of getting his instruments to the places where he was to perform and the associated travel deductions were allowable. The extreme bulk of the equipment was a decisive factor and the taxpayer was not merely keeping his violin, trumpet, bass, amplifiers and other musical equipment at home for safe-keeping and practice.

You are entitled to claim a deduction for travel from home to work when you are transporting bulky equipment. You will need to keep a record of the number of kilometres undertaken to calculate your claim using the cents per kilometre method (section 28-25 of the ITAA 1997).

D2 Travel

As a general rule, expenditure on accommodation, meals and incidentals while working away from home are not allowed as a deduction (paragraph 52 of draft Taxation Ruling TR 2017/D6). These costs are essentially 'living expenses' of a private or domestic nature. The fact that income cannot be earned unless certain expenses are necessarily incurred is not determinative of deductibility.

If a travel deduction is allowable, the expense must be directly related to how you earn your assessable income (it cannot be a private expense).

In your case, there is sufficient nexus to allow the trip as a deduction, as the dominant purpose of the trip was to undertake professional development which was endorsed by your employer. The cost of the trip would be allowed for maintaining or increasing your skills. As required, as you were away from home for more than six nights, you have kept a travel diary of the activities each day.

You are entitled to claim a deduction for your travel expenses.

D3 Clothing expenses

Expenditure on clothing and its maintenance is generally treated as a private expense and not deductible under section 8-1 of the ITAA 1997. There are some circumstances, however, where a deduction can be claimed for certain types of work related clothing.

You can deduct expenditure on protective items that you use to protect yourself from risk of illness or injury if:

·         you incurred the expense

·         there is a sufficient connection between the expenditure and earning your assessable income.

Taxation Ruling TR 97/12 provides that a deduction is allowable for the cost of buying, hiring or replacing clothing, uniforms and footwear (collectively referred to as 'clothing') if:

·         the clothing is protective in nature

·         the clothing is occupation specific and not conventional in nature

·         the clothing is a compulsory uniform (criteria for which are outlined in Taxation Determination TD 1999/62)

·         the clothing is a non-compulsory uniform or wardrobe that has been entered on the Register of Approved Occupational Clothing.

Taxation Ruling TR 2003/16 provides guidance on the deductibility of protective items. At paragraph 34 it says:

Expenditure on sunglasses, sunhats and sunscreen is not of a private or domestic nature when those items are used to protect you from the risk of illness or injury in the course of carrying out your income earning activities. This view also applies to other protective items which are clearly identifiable as principally protective items, such as heavy duty occupational wet weather gear.

You can claim a deduction for the specific clothes and shoes as they were purchased to protect you from illness while performing your duties.

D5 Other work expenses

Taxation Ruling TR 2020/1 gives the Commissioner's view on deductions for work expenses. It says that you can claim a work expense if it qualifies as a deduction under a tax law and the employee can substantiate it by getting written evidence.

Decline in value

For depreciating assets that cost $300 or more the decline in value of the asset is claimed over time (Division 40 of the ITAA 1997). A deduction is allowed for the cost of a depreciating asset by spreading the deduction over the effective life of the asset.

There are examples on our website of how to calculate the decline in value. You also need to work out the number of days in the year that you held the asset, and the number of days that it was used for a taxable purpose. You can make this claim each year, over the effective life of the asset, that it is used for work purposes.

When you are no longer using these assets in gaining your assessable income, you cannot claim a deduction, unless you use them again for income producing purposes.

Other items

These are also allowable deductions for work related expenses. They are expenses you incurred as an employee; they are directly related to how you earned your assessable income.