Edited version of private advice

Authorisation Number: 1052176313592

Date of advice: 16 October 2023

Ruling

Subject: Travel expenses

Question

Are you entitled to claim a deduction for your travel expenses from your home office in a city in one state to your employer's office in a city in another state?

Answer

No

You are not entitled to a deduction for travel expenses incurred to travel in either direction from your home office in the city of one state, to your employer's office in a city in another state.

You have incurred travel expenses to the employer's city office and back home because you reside in a city of one state and work in a city of another state. Your employer allows you to work from your home office for your convenience. You choose to live a long way from your employer's city office rather than relocate. If you resided in the other city, it is likely you would have worked more regularly from the employer's city office than at home.

The cost of your flights between the two cities and the cost of your accommodation and meals while you were working in the other city are not incurred in gaining or producing your assessable income and are private in nature. Therefore, the expenses are not deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997.

This ruling applies for the following period:

30 June 2023

The scheme commenced on:

1 July 2022

Relevant facts and circumstances

This private ruling is based on the facts and circumstances set out below. If your facts and circumstances are different from those set out below, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You were employed by Entity as Head of Operations of a major event.

Your start date was ** Month ****.

Your completion date was one month after the event concluded.

Your employment address was your home at *** street, city, state.

You were employed on a full-time basis at 40 hours per week.

The Employer would pay, or reimburse you, for your reasonable work-related expenses.

Your places of work were to be at your home address, the employer's city office or as otherwise determined by the employer.

Travel from your home office to your employer's office was your responsibility and you did not receive any additional compensation, remuneration or reimbursement from the employer for any travel, accommodation or associated costs of the travel to and from that location.

You travelled between your home office to your employer's office ** times between ** Month **** and ** Month ****.

You incurred total expenses of $* relating to travel, accommodation, food and incidental expenses in relation to your travel between your home office and your employer's office.

You have kept detailed receipts and written evidence for all the travel expenses.

It was a condition of you accepting the role offered by the employer, that you could work from your home based in city in one state as the employer's office was in city of another state, and this allowed you to stay in your home city.

The employer's office had a mix of employees working at home and in the office. If you lived in this city in another state, it would be likely that you would have spent more time in the employer's city office.

As part of your role, you travelled to other states which were hosting the Event other than the state where your employer's office was located.

You kept a travel log which shows dates and to and from locations.

You worked at home 2 to 3 days per week.

The only travel sought to be claimed was between your home office to the employer's city office.

No claims were made for your other travel.

You planned your trips from your home city to your employer's city office in advance depending on flight costs.

If the trips were too expensive you would remain at home.

You travelled more regularly when the Event was getting closer, as people from the city and the country office preferred more face-to-face communication.

Being a big event, more face-to-face meetings were organised to remove any inadequacies of online meetings.

A typical day would be holding meetings in either your home office or the employer's city office.

Most meetings were online, some planning meetings face to face.

On average you would travel two times per month to other cities.

When travelling to your employer's office, you would spend between one to three days there.

Your work in the employer's city office was very similar to your work at your home office except it was face-to-face work.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

You can deduct from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income except where the loss or outgoing is capital or private in nature (section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997).

You are not entitled to a deduction for travel expenses incurred to travel in either direction from your home office in, to your employer's office.

You have incurred travel expenses to the employer's city office and back home because you reside in a city in one state and work in a city in another state. Your employer allows you to work from your home office for your convenience. You choose to live a long way from your employer's city office rather than relocate. If you resided in the other city, you would have worked more regularly from the employer's office than at home.

The cost of your flights between and the cost of your accommodation and meals while you were working in the other city are not incurred in gaining or producing your assessable income and are private in nature. Therefore, the expenses are not deductible under section 8-1 of the Income Tax Assessment Act 1997.

Detailed reasoning

You can deduct from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income except where the loss or outgoing is capital or private in nature (section 8-1 of the ITAA 1997).

Eligibility to claim travel

You can claim a deduction for travel expenses (accommodation, meals and incidental expenses) if you travel and stay away from your home overnight in the course of performing your employment duties.

You are travelling overnight for work in the course of performing your employment duties if:

• there is no change to your regular place of work (the usual or normal place where you start and finish your work duties for your employer)
• you're away from home for short periods of time
• you stay in short-term accommodation such as a hotel.

You won't be travelling away from home overnight for work if:

• because of your personal circumstances, you live a long way from where you work
• you're living at a location where you are working
• you choose to sleep at or near your workplace rather than returning home.

Expenses you incur in these circumstances are not deductible because you incur them to start earning employment income. They are private expenses.

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 allowances paragraph 17 considers, the occasion of the outgoing on accommodation and food and drink must be found in the employee's income-producing activities, rather than in the personal circumstances of where the employee lives.

Paragraph 19 of this ruling explains, 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.

However as noted above, you won't be travelling overnight for work if you choose to live a long way from where you work because of your personal circumstances. In relation to personal circumstances, TR 2021/4 explains in the following paragraphs.

Paragraph 25 considers, an employee cannot deduct accommodation and food and drink expenses they have incurred where, due to their personal circumstances, they live far away from where they gain or produce their assessable income. These expenses are living expenses and are not deductible (see paragraphs 9, 14 and 15 of this Ruling).

Paragraph 26 considers, in these circumstances, the expenses are incurred because the employee's personal circumstances are such that they keep their usual residence, rather than relocate. The occasion of the outgoing for accommodation and food and drink is not found in the employee's income-producing activities, meaning that these expenses are not incurred in the course of gaining or producing the employee's assessable income. They are private and domestic in nature.

Paragraph 27 considers, this also applies where an employee regularly works at a particular location for one or more days each week. A particular location where an employee works regularly is a regular place of work.

Rather than relocate to the other city, you chose to work from home and travel to the other city only when you were required to be at that location. Your employer accommodated your request, however that doesn't make the cost of travelling between your home in one city and the employer's office in the other city deductible. The occasion of the outgoings on travel, accommodation and meals in the other city is not found in your income-producing activities. The expenses have been incurred because of your personal circumstances.

The travel, accommodation, and meal expenses you incurred when you travelled to your employer's office are private expenses and are not deductible under section 8-1 of the ITAA 1997.

Regular place of work

Most employees have a regular place of work, being a usual or normal place where the employee starts and finishes their work duties with a particular employer (paragraph 25 of Taxation Ruling TR 2021/1 Income tax: when are deductions allowed for employees' transport expenses?).

Paragraph 27 of, TR 2021/1 explains, in some employment arrangements there may be more than one regular workplace established. This may be expressly provided for in the employment agreement or contract between the employer and employee, or it may arise as a matter of practice in the relationship between employer and employee. A second or subsequent place of work would be a regular place of work if it is also a normal or routine place where the employee works, such that travelling between there, and the employee's home is better characterised merely as part of the necessity of travelling to and from work.

The cost of travelling from home to a location other than a regular place of work is not deductible if it reflects a choice of the employee at their mere convenience to work at a different location. In this situation the travel is not explained by their duties of employment, rather by their personal choice.

For example, if an employee of a national organisation who lives in Geelong arranges to work from the organisation's Darwin office for a period because of family reasons, the cost of travel to Darwin is not deductible. The expenses are not incurred in gaining or producing the employee's assessable income and they are also private in nature.

Similarly, if the duties of employment are such that it does not matter where they are carried out, travel from home to wherever the employee chooses to carry out their work duties is a matter of mere convenience and is not deductible.

The following paragraphs of TR 2021/1 covers situations where an employee works from home.

Paragraph 75 states, the mere fact that an employee undertakes some work duties at home at their convenience does not make expenses of travel to their regular place of work deductible. This is because the travel itself is not explained by the employment duties and is thus not part of the employment. This treatment will not change even if the travel occurs during work hours. Moreover, travel from home to a regular place of work in this situation is still explained by where an employee chooses to live in relation to their regular place of work, which is a private or domestic matter. It does not matter whether the work at home occurs informally or as part of a regular arrangement with the employer.

Paragraph 77 states, the fact that the employee might choose to undertake their duties at a location other than home or a regular place of work at their convenience does not make the cost of travel to that place deductible. For example, a person working remotely cannot deduct the cost of travel to a resort that they choose to work from. Such expenses are not incurred in gaining or producing an employee's assessable income and are private in nature.

Paragraph 78 states, where an employee has an area of their home set aside as their sole base of operations because their employer provides them with no other location to work from, that area of their home becomes their regular place of work. Such an employee will be entitled to a deduction for expenditure incurred in travelling to perform their duties, such as travel to a client's premises.

An employee's home will be their 'sole base of operations' (or 'place of business') if there is no other work location provided by their employer (see paragraphs 4, 12 and 13 of Taxation Ruling TR 93/30 Income tax: deductions for home office expenses).

Conclusion

In your case, you could have worked from your employer's city office. You chose to work from your home office because it was more convenient for you. As such, your home office is not considered to be a regular place of work and your travel to your employer's city office from your home is not travel between workplaces. It is private travel to work and is not deductible under section 8-1 of the ITAA 1997.