Edited version of private advice

Authorisation Number: 1051880448674

Date of advice: 12 August 2021

Ruling

Subject: Work related expenses

Question

Are you entitled to a work-related deduction for the costs associated with renting accommodation closer to your workplace?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You graduated with a professional qualification.

You have worked as a professional for several years.

Recently, you began work as a professional trainee.

Often you are required to work long hours up to 14 hours and sometimes up to 10 days in a row. However, you are sometimes required to work beyond this if the situation arises.

You do not receive a travel allowance, accommodation allowance or Living Away from Home Allowance from your employer.

You have a principle place of residence. The home is not rented out and you utilise a portion of the home as an office for work and education purposes as is required by your professional and educational activities and at your level of training.

Whilst working with various employers, you have rented local accommodation at each location respectively in order to reduce fatigue, maintain your wellbeing and reduce the risk of incurring an accident that could occur by driving back home to your Primary Place of Residence (PPR) (1-1.5 hours each way).

You are single and do not reside with family or others 'within an arm's length' at these locations.

In your role, you have worked in the capacity as a shift worker, a night worker and an on-call/call-back worker. All in all, you believe would be considered to be at high risk of developing fatigue which would detrimentally impact your capacity to work effectively and safely, and also reduce your ability to work additional hours or overtime which are income-generating activities.

You also work as a sole trader in the capacity of a professional assistant and predominantly work in this role at several private facilities when you are not working at a public facility. You have worked at a couple of private facilities and make use of the rental accommodation when required for the above reasons.

As part of your profession and level of training you are also required to study for exams to advance further in your training as well as engage in ongoing learning activities, conferences and courses. You are enrolled in a course of study at an educational facility which recommends a minimum 10 hours of study per subject per week placing even further pressure on your limited time. As such your fatigue would be further exacerbated if you were required to commute to your PPR daily, instead you are able to use the time saved by renting local accommodation to fully engage in educational and research activities.

When you are not required to work consecutive shifts at the above locations you drive out and return home to your PPR.

You state you are acting as a drive-in drive out worker, but you are paying for your own accommodation in order to safely earn your income.

The rental accommodation is not a 'secondary residence' and you will be vacating the property once your contract at your current place of employment ends. All your mail and bills are sent to your PPR.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1.

Reasons for decision

According to section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), you can deduct a loss or outgoing if it is incurred in producing your assessable income except where the outgoing is of a capital, private or domestic nature.

Draft Taxation Ruling 2021/D1 Income tax and fringe benefits tax: employees: accommodation and food and drink expenses, travel allowances, and living-away-from-home allowances (TR 2021/D1) considers the deductibility of accommodation and food.

Accommodation and food and drink expenses are ordinarily private or domestic in nature and are generally not deductible under section 8-1 of the ITAA 1997.

Paragraphs 13-14 of TR 2021/D1 states:

13. Living expenses are a prerequisite to gaining or producing an employee's assessable income and are not incurred in performing an employee's income-producing activities. Living expenses are also private or domestic in nature.

This means that even if these expenses were incurred in gaining or producing assessable income, they still would

not be deductible due to the application of paragraph 8-1(2)(b).

14. While living expenses must be incurred before any assessable income can be derived, a loss or outgoing is not incurred in gaining or producing an employee's assessable income merely because it is necessary. This is particularly relevant to living expenses.

A person must eat and sleep somewhere, whether or not they engage in employment.

The courts have concluded that accommodation and meal expenses incurred while working away from home are essentially living expenses of a private or domestic nature and therefore are not deductible.

The expenses you incur enable you to stay in proximity to your work place. They are a prerequisite to the earning of assessable income and are not expenses incurred in the course of gaining or producing that income.

In the case Federal Commissioner of Taxation v. Charlton 84 ATC 4415; (1984) 15 ATR 711 (Charltons Case), the taxpayer was a pathologist employed to carry out autopsies for the local coroner in Bendigo. He rented a flat in Bendigo while maintaining a permanent family home in Melbourne, located approximately 150kms away. There was evidence that there was difficulty in finding motel accommodation in Bendigo and the taxpayer was reluctant to make the round trip back to Melbourne without rest. The taxpayer claimed that the rental expenses were incurred in the production of assessable income.

Justice Crockett of the Supreme Court of Victoria allowed the Commissioner's appeal and ruled:

The Commissioner contends (correctly in my view) that, if the taxpayer should choose to reside so far from the place where it is necessary for him to be in order to gain his income that he, not only needs to incur expense in travelling to that place but, also to incur expense in the provision to him of some accommodation transitory or discontinuous in its use and secondary to or temporarily supplemental of his actual home, then that expense, too, is for the same reason non-deductible.

The taxpayer's election to live in Melbourne and not in Bendigo meant that the rental expended on the flat in order to enable him to secure accommodation in which to recuperate from the rigours of travel and the nature of his work was an expenditure dictated not by his work but by private considerations.

This is supported by the decisions in Federal Commissioner of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466 (Toms Case), where the Federal Court held that expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location were not an allowable deduction as they were considered to be private expenses.

Your case is comparable to that of the taxpayers in Charltons case and Toms case. You live away from your workplace and incur expenses in renting accommodation to be closer to the hospitals you work at.

The renting of the accommodation puts you in a position to earn your income and the expense is not incurred in the day to day activities of your work.

The Commissioner appreciates that you work long hours and may experience fatigue. However, there is no discretion under the legislation to allow these expenses as a deduction.

These expenses are private in nature and are not deductible under section 8-1 of the ITAA 1997.