Edited version of private advice

Authorisation Number: 1051753071607

Date of advice: 24 September 2020

Ruling

Subject: Deductibility of travel expenses

Question

Are you entitled to claim a deduction for your travel expenses?

Answer

No.

This ruling applies for the following period

Year ended 30 June 20XX

The scheme commenced on

1 July 20XX

Relevant facts and circumstances

You currently reside in City A.

You are employed at a work site near City B.

You are expected to travel between City A and the City B work location, and as such you incurred the following approximate travel and other travel related expenses:

·         Accommodation in City B

·         Taxi/Parking/Fuel

·         Flights

·         Meals

Your employment contract states your "Point of hire" is at Cirty A, however your shift start time commences on site from the beginning of the pre-start meeting, and will finish at the end of the close-out meeting.

You are not paid a travel allowance and your travel expenses are not reimbursed by your employer.

Relevant legislative provision

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.

Taxation Ruling TR 2017/D6 Income tax and fringe benefits tax: when are deductions allowed for employees' travel expenses? (TR 2017/D6) sets out general principles for determining whether an employee can deduct travel expenses under section 8-1 of the ITAA 1997. A travel expense includes airfares, accommodation, meal and incidental expenses (paragraph 2 of TR 2017/D6). TR 2019/D7 Income tax: when are deductions allowed for employees' transport expenses? (TR 2019/D7) sets out when an employee can deduct transport expenses under section 8-1 of the ITAA 1997. This includes the cost of travel by airline, train, taxi, car, bus, boat or other vehicle. The subject matter of TR 2019/D7 partially overlaps with TR 2017/D6. To the extent that TR 2019/D7 has different views to TR 2017/D6 in relation to transport expenses, the views in TR 2019/D7 take precedence (although it is noted in your circumstances that the two draft rulings do not provide any competing views).

As a general rule, expenditure for accommodation and meals is of a private or domestic nature and not deductible. This includes the ordinary costs of maintaining a home and consuming food and drink to go about your daily activities, such as to attend work. These costs are preliminary to the work and are not incurred in the course of performing those activities (paragraph 51 of TR 2017/D6). Likewise, where accommodation and meal expenses are incurred by an employee in living away from home to work, they are preliminary to the work and not deductible (paragraph 52 of TR 2017/D6). The private or domestic nature of these expenses often reflects a choice the employee has made. This includes an employee's choice about where to live (paragraph 53 of TR 2017/D6).

A transport expense is not deductible where the travel is to start work or depart after work is completed. The cost of such travel is not incurred in gaining or producing the employee's assessable income (paragraph 19 of TR 2017/D6). The fact that an employee lives a significant distance from their regular place of work does not make their transport expenses deductible, for example, if they are required to fly to attend work. In such instances, the transport expenses are incurred because the employee lives at a distance from their regular place of work, rather than the employment itself being the occasion for the expenses. The expenses are explained by where the employee lives in relation to where their regular place of work is located and are private expenses (paragraph 42 of TR 2019/D7).

TR 2019/D7 provides the following example at paragraph 63:

Bill lives in Perth and has been specifically engaged to work on a 12-month contract at a mine site near Geraldton (work site) on a fly-in fly-out basis. Bill's employer agrees to pay for his flights to and from the closest major airport to his home in Perth. It does not matter to Bill's employer where he lives during his down time. As such, Bill can choose another major airport where he flies to and from at the start and end of each roster period, provided it is not more than the cost of the trip from his home in Perth. Bill's roster is 20 days on and seven days off. Before the start of his roster, Bill travels from his home to Perth airport, flies from Perth to Geraldton and then a catches a bus from Geraldton airport to the work site. Under the terms of the agreement he is employed under, Bill's rostered period does not start until he arrives at the work site and it ends when he leaves the work site on day 20, from which point he is on leave. At the end of his roster period, he catches the bus to Geraldton airport, flies from Geraldton to Perth and then travels from Perth airport to his home. Bill's travel does not occur on work time and it is not part of his employment. As Bill does not commence duty until he arrives at the work site and ceases duty when he leaves the work site, the occasion of his travel between his home and the work site is not his employment and accordingly, it is not deductible. The travel is private as it is merely a prerequisite to earning his assessable income. That is, the expenses are incurred in order to put him in the position to perform his duties of employment rather than in the course of performing the duties which are productive of his salary and wage income.

In your case, it is acknowledged that the point of hire in your contract is City A. However, it is also noted that your contract also provides that your work location is City B, and your shift start and end times occur on site at that location.

Your circumstances are comparable to the example above. Your transport and accommodation expenses arise from your choice to work in City B and live in City A. Your travel does not occur on work time and is not part of your employment. Your travel expenses are a prerequisite or preliminary to your work and put you in a position to perform your employment duties rather than in performing those duties. Your costs (including airfares, taxis, parking and fuel) of travelling between your home and city B, and accommodation and meal expenses in City B are private in nature and not deductible.