Edited version of private advice

Authorisation Number: 1052210129265

Date of advice: 17 January 2024

Ruling

Subject: Deductions - work-related travel expenses

Question

Are you entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for airfares, accommodation and incidental travel expenses incurred for travel between your home in Location A and your workplace in Location B?

Answer

No. Expenses incurred as a consequence of living in one place and working in another are considered private in nature and no deduction is allowable under section 8-1 of ITAA 1997.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You live in Location A.

You are employed by Employer, an employment agency.

On XXXX, you accepted a contract with the Entity commencing XXXX.

The Entity's office is located in Location B.

On engagement, you were verbally requested to have a weekly physical presence in the office per month.

On XXXX, the Entity issued a hybrid working model.

Section X of this model specifically states:

"Everyone is required to attend the office on a regular basis, as their principal place of employment"

And

"We expect everyone to live within the State of X (unless a delegated officer is satisfied, based on the specific nature of their role, that a person is able to fulfil their role whilst living outside the State of X) and attend the office when reasonably requested and at their own expense."

You have undertaken your employment from your Location A residence, with monthly attendances at the Location B office.

You have incurred travel expenses including airfares to and from Location B, accommodation, and travel to and from the Entity office.

You have not sought or been reimbursed by either Employer or the Entity, for any of your airfares, accommodation or incidental travel expenses.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent which they are incurred in gaining or producing assessable income except where the outgoings are of a capital or private in nature.

The deductibility of expenses where an employee is travelling between home and a regular place of work has long been regarded as settled. With limited exceptions, such expenses are not deductible.

In considering the deductibility of travel expenses, a distinction is made between travel to work and travel on work. The cost of travel between home and work is generally incurred to put a person in a position to perform duties, rather than in the performance of those duties. It is only if the duties of the job require a taxpayer to travel that the taxpayer's expenses can be deducted.

Taxation Ruling TR 2021/1 Income tax: when are deductions allowed for employees' transport expenses? (TR 2021/1) discusses in detail the principles for determining whether an employee can deduct travel expenses under section 8-1 of the ITAA.

TR 2021/1 explains that expenses incurred for ordinary travel between home and a regular place of work are not deductible. This is not changed by the fact that the employee performs work-related tasks at home as a matter of choice or for their convenience.

Paragraphs 24 - 28 of TR 2021/1 specifically explain the term 'Regular place of work'. The usual position that the cost of travel between home and the employee's regular place of work is not deductible does not change merely because the employee's home is very distant (for example, requiring a flight) from their regular place of work.

Paragraph 48 of TR 2021/1 further explains that an employee living a significant distance from their regular place of work does not make their transport expenses deductible, for example, if they are required to fly to attend work. In such instances, the transport expenses are incurred because the employee lives at a distance from their regular place of work, rather than the employment itself being the occasion for the 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 (TR 2021/4) discusses 'Travelling on work'.

Paragraph 19 of TR 2021/4 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, Paragraph 24 of TR 2021/4 explains that if the employee's personal circumstances are such that they live far away from where they gain or produce their assessable income, then the employee will not be travelling on work and the expenses incurred will be living expenses.

Living expenses are a prerequisite to gaining or producing an employee's assessable income and are not incurred in performing 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) of ITAA 1997.

Application to your circumstances

You have a main residence in Location A and have accepted work in another location.

You have made a choice to work away from your normal place of residence to take up the position in another location. Your travel is not considered to be work-related, and the associated costs not incurred in the course of gaining or producing your assessable income.

Consequently, the cost of flights, accommodation, and incidental expenses you incur in travelling between home, your workplace, and back home are inherently private or domestic in nature and no deduction is allowable under section 8-1 of ITAA 1997.