Edited version of private advice

Authorisation Number: 1051915439085

Date of advice: 18 November 2021

Ruling

Subject: Deductibility of accommodation expenses

Question

Can you claim rental expenses as a deduction under Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20xx

Year ending 30 June 20xx

The scheme commences on:

1 January 20xx

Relevant facts and circumstances

Your family home is in Location A.

You obtained employment in Location B.

You moved from your family home in Location A to live in Location B in order to fulfil the duties of your employment.

Your spouse continues to reside in your family home Location A.

You are renting a property in Location B, for which a 12-month lease was signed.

The entire rental expense of this property is offset by an allowance paid to you by your employer.

Your tax agent has explained that you signed a declaration confirming that the allowance provided to offset your accommodation expenses constitute a living away from home allowance (LAFHA) in accordance with the Fringe Benefits Tax Assessment Act 1986 Section 30.

Relevant legislative provisions

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, or relate to the earning of exempt income.

It is a question of fact whether an expense for accommodation is incurred in gaining or producing assessable income or is of a private or domestic nature.

It is only in limited circumstances that an employee's accommodation expenses are deductible, as generally, accommodation expenses are of a private or domestic nature. Taxation Ruling TR 2021/4 Income tax and fringe benefits tax: employees: accommodation and food and drink expenses, travel allowances, and living-away-from-home allowancessets out the general principles for determining whether an employee can deduct travel expenses (including accommodation expenses) under section 8-1 of the ITAA 1997.

Accommodation expenses are only deductible when travel is an essential characteristic of the job itself, and the necessity to stay away from the employee's usual residence overnight is encountered while performing their income producing activities (paragraph 19 of Taxation Ruling TR 2021/4).

If an employee's usual residence is far away from their new place of work and they incur accommodation expenses to be near their new workplace, then these expenses are incurred because the employee chooses to keep their usual residence, rather than relocate. Any accommodation expenses are therefore living expenses which are incurred prior to gaining or producing assessable income and are private and domestic (paragraphs 24, 40 and 41 of Taxation Ruling TR 2021/4).

Your situation as you have described it is that you are living away from your family home for work, which is consistent with the definition of living away from one's usual residence due to employment provided in Taxation Ruling TR 2021/4. Consequently, the accommodation expenses are incurred prior to the earning of assessable income and are private and domestic.

As these expenses are not incurred in gaining or producing assessable income, but are private and domestic in nature, they are not deductible under Section 8-1 of the ITAA 1997.