Edited version of private advice

Authorisation Number: 1051996730105

Date of advice: 22 June 2022

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

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are a junior officer working in a hospital.

You are required to live in a reasonable distance when on call, to be able to reach the hospital within 30 minutes in an emergency situation.

You normally reside with your parents.

During the financial years ended 30 June 20XX and 30 June 20XX0, you worked at a hospital some distance from your parents' home.

From January 20XX to February 20XX, you worked at another hospital some distance from your parents' home.

From February 20XX to February 20XX, you expect you will continue working at that hospital.

Whilst working at these hospitals you rented various properties to stay in while you were on call.

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 to the extent it is incurred in producing your assessable income except where the outgoing is capital, private or domestic in nature.

Taxation Ruling 2021/4 Income Tax and fringe benefits tax: employees: accommodation and food and drink expenses travel allowances, and living-away-from-home allowances (TR 2021/4) considers the deductibility of accommodation and food expenses.

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

Paragraph 14 of TR 2021/4 states that 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 are incurred in gaining or producing assessable income, they will still not be deductible due to the application of paragraph 8-1(2)(b) of the ITAA 1997.

Paragraphs 19-21 of TR 2021/4 state:

19. If an employee is required by their employer, as an incident of their employment (that is, the duties of employment), to stay away from their usual residence overnight for relatively short periods of time, the employee will be travelling on work and the occasion of the outgoing on accommodation and food and drink will generally be found in the employee's income-producing activities.

20. Conversely, where the accommodation and food and drink expenses are incurred because of the employee's personal circumstances are such that they live far away from where they gain or produce their assessable income, the occasion of the outgoing will not be found to be in the employee's income producing activities.

21. Travelling on work does not describe the activities of employees who ... choose to sleep near their workplace, rather than returning to their usual residence between their work shifts.

In the case Federal Commissioner of Taxation v. Charlton 84 ATC 4415; (1984) 15 ATR 711 (Charlton's case), the taxpayer was employed in Bendigo. He rented a flat in Bendigo while maintaining a permanent family home in Melbourne. The taxpayer claimed that the rental expenses were incurred in the production of assessable income. Crockett J stated at 84 ATC 4419-4420:

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.

The decision in Charlton's case is supported by the decision 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 workplace 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 the Charlton's case and Toms' case. You live away from your workplace and incur expenses in renting accommodation to be closer to where you work. 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 expenses you incur for renting properties close to your workplace while on call are private in nature and are not deductible under section 8-1 of ITAA 1997.