Edited version of private advice

Authorisation Number: 1052230585341

Date of advice: 13 March 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 all associated flight costs, accommodation, airport transfers and associated food expenses incurred by you to meet your employer's mandatory office attendance requirement?

Answer

No.

This ruling applies for the following period:

Year ended XX XXXX 20YY

The scheme commenced on:

XX XXXX 20YY

Relevant facts and circumstances

You are employed by Company A.

You are employed as a Senior XXX.

Company A's head office is located at a building at Location A.

You used to live in a home at Location A.

During the Covid-19 pandemic Company A allowed staff to work from home.

You received Company A's permission to relocate to Location B in another State and continue your employment.

Company A does not maintain an office in Location B.

Company A made it mandatory to work in the Location A office twice per month.

You do not receive an allowance or any other form of reimbursement for this arrangement.

You travel to Location A for one return trip per month in accordance with Company A's policy.

You perform the same duties when working in the Location A office, as you do when you work from home at Location B.

You do not have any extra work responsibilities when working in the office in Location A.

You travelled to Location A in the following months in the 20YY financial year: XXXX, XXXX, XXXX, XXXX, and XXXX.

You would like to claim all associated flight costs, accommodation, airport transfers and associated food expenses incurred when traveling to Location A to work in the office.

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.

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/D1) considers the deductibility of accommodation and food. This ruling refers to employees and considers the negative limbs of section 8-1 of the ITAA 1997

Whether accommodation and food and drink expenses are deductible depends on the facts and circumstances of each case. This Ruling uses examples to show how to determine the deductibility of these expenses in a range of situations.

Paragraphs 14-17 of TR 2021/4 state:

14. 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).

15. While living expenses must be incurred before any assessable income can be derived, a loss or outgoing is not incurred in gaining or producing an employee's assessable income merely because it is necessary. This is particularly relevant to living expenses. A person must eat and sleep somewhere, whether or not they engage in employment.

16. 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.

17. 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.

Furthermore, paragraphs 20-25 of TR 2021/4 state:

20. Where the accommodation and food and drink expenses are incurred because 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 in the employee's income-producing activities.

25. 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.

In your circumstances, you have chosen to relocate to Location B. You have chosen to do this knowing there is not an office in Location B and that you will be required to meet your mandatory office days in Location A. The expenses you incurred are because of your personal circumstances, that you live far away from where you gain or produce your assessable income, the occasion of the outgoing will not be found in your income-producing activities. Example 2 and Example 3 within TR 2021/4 gives describe personal circumstances where accommodation and food and drink expenses are not deductible. These examples closely align with your facts.

Example 2 in paragraphs 28-30 has been included below:

28. Michelle lives in Brisbane with her family. Michelle accepts a job in Canberra. Early on a Monday morning, Michelle catches a flight to Canberra and on Friday afternoon she returns by plane to Brisbane. On Monday to Thursday nights, Michelle stays in a serviced apartment. Sometimes she buys groceries and cooks for herself and sometimes she eats out.

29. The occasion of the outgoings is not explained by Michelle's employment. Rather, it is explained by her personal circumstances of living in Brisbane while working in Canberra. The expenses Michelle incurs are private and domestic in nature.

30. Accordingly, Michelle is not entitled to a deduction for the amount she spends on renting the serviced apartment, the groceries she buys or the food and drink she purchases when she eats out.

Example 3 in paragraphs 31-32 has been included below:

31. Sue lives with her family in Sydney. Sue takes on a leadership role with a company that has offices all around Australia. The role is based in Melbourne. Sue's arrangement with her employer is that she must attend the Melbourne office at least three days per week, but at her discretion, she can work out of the Sydney office, at another office, or from home up to two days per week. Because Sue lives in Sydney, her personal circumstances allow her to work at the Sydney office two days per week for her convenience. Sue's duties do not require her to work in the Sydney office.

32. The occasion of Sue's travel to Melbourne and her accommodation and food and drink expenses are not explained by Sue's employment duties but rather her personal circumstances. Instead of relocating her usual residence to Melbourne, Sue's personal circumstances allow her to continue living in Sydney with her family as she has negotiated an arrangement whereby she can work from Sydney as a matter of convenience. Accordingly, the expenditure that Sue incurs on accommodation, food and drink when she travels to and stays in Melbourne is not deductible.

In FC of T v. Charlton 84 ATC 4415 Crockett J., in the Supreme Court of Victoria, the circumstance where a taxpayer maintained a residence in one area, but predominately worked in another that was several hours travel away. The taxpayer also maintained a small residence at this second location. Crockett J., at pp. 4419-4420, referred to the personal nature of expenses incurred by a taxpayer in travelling from his home to his place of work. He added:

"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."

At pp. 4420-4421 his Honour stated the conclusion:

"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."

Further, in FC of T v Green (1950) 81 CLR 313 at pp 317-318, the Full High Court observed:

"It is not enough in order to establish a right to a deduction to show that it was proper or reasonable for the taxpayer to make the expenditure which he claims as a deduction. For example, it is perfectly reasonable and proper for a taxpayer to incur living expenses and many expenses of a private or domestic nature but such expenditure is expressly excluded from deductibility by the final words of the first sub-section of section 51. Thus... a taxpayer cannot deduct ordinary living expenses. It is true that such expenses are necessarily incurred if any income is to be earned or otherwise derived, but such expenses would be incurred whether income was earned or otherwise derived or not."