Edited version of private advice

Authorisation Number: 1051793014713

Date of advice: 23 December 2020

Ruling

Subject: Deductions - work related expenses

Question 1

Is the cost of the travel from your home into the caravan park where you stay whilst working deductible?

Answer

No.

Question 2

Is the cost of the travel from the caravan park where you stay whilst working to your home deductible?

Answer

No.

Question 3

Is the cost of the travel between the caravan park and your work deductible?

Answer

No.

Question 4

Are the costs of the short-term accommodation at the caravan park and meal costs deductible while you stay near work?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 2019

Year ending 30 June 2020

Year ending 30 June 2021

Relevant facts and circumstances

You are employed on a casual basis at a mine site.

You travel approximately 240 km from your home to where you stay in a caravan park and the same on the return trip.

You can be required to work from 1 to 5 days in a row.

The duration of each work shift is 12.5 hours per day - from 4.30am to 5pm.

You stay at a caravan park, in short term accommodation cabins whilst working at the Mine site.

You travel from your home the night before your shift starts and you stay overnight at the caravan park for the duration of your casual work at the mine site.

Once your last shift ends, you return home.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 paragraph 8-1(2)(b)

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.

Draft taxation ruling TR 2017/D6 Income tax and fringe benefits tax (a consolidation of various other previous applicable rulings): when are deductions allowed for employees' travel expenses? (TR 2017/D6) sets out the general principles for determining whether an employee can deduct travel expenses under section 8-1 of the ITAA 1997. TR 2017/D6 is a consolidation of rulings that applied during the relevant years of this Private Binding Ruling. For a full list of consolidated rulings refer to paragraph 10 of TR 2017/D6.

A travel expense is an expense relating to transport (airline, train, car etc.) and accommodation, meal and incidental expenses of an employee when they travel away from home for work (paragraph 2 of TR 2017/D6).

Travel to start work is not required by the work activity but is preliminary to the work (paragraph 23 of TR 2017/D6).

The costs of relocating for work or living away from home to work are preliminary to work and are not deductible (paragraphs 16, 49 and 52 of TR 2017/D6), regardless of whether commencing new employment or transferring permanently or temporarily within an existing employment. The costs of relocating or living away from home are not incurred in performing an employee's work activities. They are of a private or domestic nature and reflect an employee's choice about where to live (paragraph 53 of TR 2017/D6). This is the case even though a taxpayer may, as a matter of practicality, need to incur the expenditure to earn assessable income.

As a general rule, expenditure on meals and incidentals while working away from home are not allowed as a deduction (paragraph 52 of 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.

In the case of John Holland Group Pty Ltd & Anor v Commissioner of Taxation, the case involved particular FIFO employment arrangements which meant that the air travel provided by the employer was not exempt under subsection 47(7) of the FBTAA. This was because the usual place of employment was adjacent to an eligible urban area as defined (see section 140 of the FBTAA).

The decision of the Full Court clarifies the law regarding the deductibility of travel expenses. As concluded by the Full Court, the case under consideration in Lunney was of 'ordinary people' paying fares 'to enable them to go day by day to their regular place of employment or business and back to their homes'; it was not about the specific demands occasioned by employment that required, as part of the employment, travel to a remote place.

The employees in this case were required by their employer, as part of their employment duties, to travel each way between xxx airport and the project accommodation at a remote location. This travel occurred during working time while the employees were rostered-on and paid. This travel did not include the private travel between the employee's home and xxx airport.

This was a case of well settled law being applied to a new factual situation. Such matters can involve questions of fact and degree and different facts may result in different conclusions as to deductibility.

In your case, your transport, accommodation, meal and incidental expenses are considered to be of a private nature, your expenses were incurred prior to commencing work and not in the course of work. Accordingly, you are not entitled to a deduction for your expenses under section 8-1 of the ITAA 1997, the expenses were not incurred in gaining or producing assessable income they were expenses of a private or domestic nature.