Edited version of private advice

Authorisation Number: 1052192745856

Date of advice: 29 November 2023

Ruling

Subject: Work related travel expenses

Question

Are you entitled to a deduction for quarantine accommodation expenses you incurred when you returned to Australia from a certain country for employment, under the Income Tax Assessment Act 1997 Section 8-1?

Answer

No. As you did not incur accommodation expenses related to travelling for work-related purposes, the expenses incurred are not deductible in accordance with section 8-1 of the Income Tax Assessment Act 1997.

This ruling applies for the following period:

Year ended 30 June 2022

The scheme commenced on:

1 July 2021

Relevant facts and circumstances

You permanently departed Australia for a certain country on XX month XXXX.

You are employed in a certain occupation.

You were offered employment back in Australia due to your skills in a certain occupation during the outbreak of Covid.

Your employer supplied a travel request letter, dated XX month XXXX, for you to return to Australia once your current Visa issued.

You arrived back in Australia on XX month XXXX as a permanent resident for work purposes.

Your employer did not pay for your flights back to Australia.

Due to state Government Health orders during Covid, you were required to quarantine for 14 days at a designated quarantine hotel as soon as you landed in Australia.

The state Government issued you a Quarantine Direction document, directing you to stay at an allocated room at the quarantine hotel from the day that you landed, XX month XXXX until XX month XXXX.

You incurred the total amount of $XX for the quarantine hotel accommodation as per provided invoice.

Your employer did not reimburse you for the accommodation expenses.

Your employment commenced on XX month XXXX.

Relevant legislative provisions

Income Tax Assessment Act 1997 (ITAA 1997) subsection 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.

Accommodation and food and drink expenses are ordinarily private or domestic in nature and are generally not deductible under section 8-1, as stated in paragraph 9 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 14 considers 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 were incurred in gaining or producing assessable income, they still would not be deductible due to the application of paragraph 8-1(2)(b) it is a loss or outgoing of a private or domestic nature.

Accommodation Expenses

Paragraph 16 of TR 2021/4 explains that to be deductible, the accommodation and food and drink expenses must have a sufficiently close connection to the performance of the employment duties and activities through which the employee earns income. It will not be enough to show some general link or causal connection between the expenditure and the production of income.

Paragraph 17 states that for outgoings on accommodation and food and drink to be deductible, they 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.

Paragraph 25 of TR 2021/4 states that 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.

Paragraph 47 states that where an employee relocates their home, the employee is changing their usual residence and the expenses are not incurred in performing their income-producing activities.

Application to your circumstances

Your accommodation expenses were incurred before you derived assessable income from your employer. You did not incur a loss or outgoing in gaining or producing your assessable income. The expenses were incurred as part of your relocation to Australia for work. As per paragraph 79 of TR 2021/4, they are considered living expenses and are not deductible under section 8-1 of the ITAA 1997.