Edited version of private advice

Authorisation Number: 1052252164226

Date of advice: 22 May 2024

Ruling

Subject: Work related expenses - travel expenses

Question

Can I claim my work-related travel expenses for flights and rideshare/taxi fares between City A and City B, under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No - as the travel is attributable to your private decision to live in City A and work in City B.

This ruling applies for the following periods:

Year ended XX June 20XX

Year ending XX June 20XX

The scheme commenced on:

XX July 20XX

Relevant facts and circumstances

You work remotely for Company A.

You are based in City A under a flexible working arrangement, this has been approved since March 20XX.

Although your main working office is in City B you are based in City A due to a personal health decision stemming from a need to protect your mental well-being. Moving to work from home in City A has given you closer support systems, and the move has been supported by your employer.

Your nominal office is in Town A City B, you seldom visit this office.

You are a XXXXX.

Your role involves managing state-wide relationships with key XXXX and XXXXX stakeholders and overseeing the XXXX, who meet face-to-face five times a year across City B.

You supervise the XXXX team responsible for coordinating state-wide XXXX and XXXX events, you attend some of these events.

You oversee XXXXX that are located across every regional area of City B.

Most of your work can be completed online; however, some duties require you to be there in person in various locations across City B.

You work from home XX% of the year and then travel to various locations around City B to fulfill the requirements of your role when it is necessary to carry out your duties.

You work in XXXXX and XXXXX, and it is essential that you attend some of the events in person.

Your schedule fluctuates, where you may travel for one meeting and return home the next day or trips could involve XXXX meetings, events, or XXXX meetings particularly if online alternatives are not feasible.

Your work supplies you with a vehicle once you are in City B.

You do not carry any bulky tools or equipment, just your computer, clothes and personal belongs.

Your travel details for the 20XX Income year are as follows:

•         XX October 20XX -XXXXX Group meeting, Town B regional office.

•         XX October 20XX - XXXXX Committee meeting, Super Resource Centre Town C

•         XX November 20XX - XXXX Ceremony, City B University Capability Hub.

•         XX November 20XX - End of year Team catch-up, Town D.

•         XX February 20XX - XXXXX Ceremony, City B University Capability Hub

•         XX February 20XX - XXXX Committee meeting - Business Centre Town E

•         XX March 20XX - XXXXX Ceremony, City B University Capability Hub.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Taxation Ruling 2020/1 - Income Tax: employees: deductions for work expenses under section 8-1 of the Income Tax Assessment Act 1997

Taxation Ruling 2021/1 - Income tax: when are deductions allowed for employee's transport expenses?

Reasons for decision

Summary

Can I claim my work-related travel expenses for flights and rideshare/taxi fares between Sydney and Melbourne, under section 8-1 if the Income Tax Assessment Act 1997 (ITAA 1997)?

Detailed reasoning

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except when the outgoings are of a capital, private or domestic nature.

An employee can only deduct a transport expense under section 8-1 of ITAA 1997 if:

•         They incur the expense in gaining or producing their assessable income.

•         The expense is not capital, private or domestic in nature.

•         The expense in not incurred in gaining or producing exempt income or non-assessable non-exempt income.

•         A provision of the Act does not prevent it from being deducted.

Where the occasion of transport expenses can be found in the employee's employment duties, these expenses will be incurred in the gaining or producing of the employee's assessable income. However, a close connection between a journey and the employee's private or domestic life is a strong indication that the journey occurs outside of the employee's income-producing activity, and this is therefore not deductible.

Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances, and reimbursements for transport expenses, provides that a deduction is generally not allowable for the cost of travel by an employee between home and their normal workplace as it is considered to be a private expense. The cost of travel between home and work is generally incurred to put the employee in a position to perform duties of employment, rather than in performance of those duties.

You are only able to claim trips between home and your workplace in certain circumstances:

•         Where home is your base of employment, that is you start work at home, then travel into your place of work to complete your duties, undertake work in X separate locations, or the trip to your regular place of work isn't part of a normal trip to work that would have occurred anyway.

•         When you are transporting bulky tools and equipment, tools that are awkward to transport, tools essential to perform your work and can only be conveniently transported using a motor vehicle.

•         When you have itinerant or shifting places of work, working at more than one workplace before returning home, travel is a fundamental part of your job, you work in a web of workplaces and have no fixed place of work.

Paragraph 48 of Taxation Ruling (TR) 2021/1 discusses transport expenses when travelling away from home to work, we are advised that the mere fact that an employee lives 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 these 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 expense. The expenses are explained where the employee chooses to live in relation to where their regular place of work is located and therefore these expenses are not incurred in gaining or producing assessable income. The transport expenses are also considered a private expense.

Paragraph 49 of TR 2021/1 provides us with the example of Isabelle. She is specialist technician who lives in Brisbane. She works as an employee for a company based in Sydney on a part-time basis. On the days she is required to work (Wednesdays and Thursdays), she drives from her home in Brisbane to the airport, catches a flight to Sydney, then a taxi to the company's office. She stays overnight and returns home Thursday evening. Isabelle's transport expenses between her home, Brisbane airport, return flights from Brisbane to Sydney and the taxi fares in Sydney are not deductible. Isabelle's travel is undertaken to put her in position to commence her duties and the expenses are not incurred in the gaining or producing of her assessable income.

The expenses are incurred as a necessary consequence of choosing to live in Brisbane and work in Sydney, the travel is private in nature, as it is considered between home and work and is a prerequisite to gaining or producing her assessable income.

Paragraphs 61 and 62 of TR 2021/1 has the example of Sue who 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 and the duties attached to it can be primarily performed in Melbourne. However, Sue enters into an arrangement with her employer where she must attend the Melbourne office at least three days a week, but at her choice can work out of the Sydney offices up to two days a week.

Although the Melbourne office is a distant work location and Sue carries out her duties at both the Melbourne and Sydney offices, Sue's travel from home to those offices will not be deductible. This is not a case where the role Sue undertakes necessarily requires travel to be undertaken. The substantive duties attached to Sue's role do not require her to travel to between Melbourne and Sydney. The travel is attributable to Sue's choice to remain living in Sydney whilst taking on a Melbourne based role. Sue is required to work in Melbourne and for convenience she may also work some of the time in Sydney. The transport expenses incurred in travelling between Sydney and Melbourne are not incurred in gaining or producing her assessable income. The travel is better characterised as travel from home to a regular work location which is attributable to her private circumstances, rather that is her choice about where to live rather than being a necessary incident of her employment.

Paragraph 76 of TR 2021/1 gives us the example of Nico, a travel agent. Nico has a small child, so his employer allows him to work at home, in his home office. At least twice a month Nico is required to attend the office for regular meetings. His home office is not a place of business, because Nico's employer would normally accommodate him in their offices. At Nico's request they have allowed him to work from home within an extended bandwidth. The transport expenses relating to travel from Nico's home to his office are not incurred in the gaining or producing of his assessable income and are private in nature.

Nico works from home for his convenience so that he can look after his small child and have work flexible hours. Therefore, his travel from home to his regular workplace at the office is not explained by his work duties, that is the travel is not relevant to the practical demands of carrying out Nico's work duties. It is a consequence of Nico's choice to work from home, rather than his office. Nico is not entitled to claim a deduction for his transport expenses.

Paragraphs 5 and 6 of Taxation Ruling IT 2543 Income Tax: transport allowances: deductibility of expenses incurred in travelling between home and work provided the following:

"It is, of course, beyond question that unless an employee attends at his place of employment he will not derive assessable income and, in one sense, he makes the journey to his place of employment in order that he may earn his income. But to say that expenditure on fares is a prerequisite to the earning of a taxpayer's income is not to say that such expenditure is incurred in or in the course of gaining or producing his income."

The general principles established in Lunney and Hayley and the exceptions to these principles are dealt with in detail in the above two Taxation Rulings.

6. The principles outlined in Lunney and Hayley on the deductibility of costs of travel between home and work have again been considered in recent decisions of the Administrative Appeals Tribunal (Case T100, Case U156, Case V103, Case V111 and Case V131) and by Northrop J. in F.C. OF T. v Genys 87 ATC 4875; 19 ATR 356. The decisions help to clarify the application of these principles to factual situations where abnormal expenditure is incurred in travelling between home and work. In particular they confirm that:

•         Lunney and Hayley establishes that the fundamental test in determining the deductibility of an expense under subsection 51(1) is the essential character of that expense. Further, the essential character of expenditure incurred in travelling between home and work is of a private nature (Genys Case, Case T100 and Case U156);

•         generally, the duties of a salary and wage earner will not commence until the arrival at a place of work and will cease upon departure from work (Case U156);

•         the mode of transport, the availability of transport, the lack of suitable public transport, the erratic hours and times of employment, the on-call nature of the employment, the time of travel, the distance of travel, the unavailability of residential accommodation near the place of work, the frequency of travel and the necessity of travel are not factors which will alter the essential character of travel between home and work (Case U156, Case V103, Case V111 and Case V131).

The cost of travel between your home and work is commonly experienced by you, as the employee, in a position to perform your duties of employment, rather than in the performance of those duties. As your travel is between your home and work, the travel is considered to be private in nature and travel expenses are, therefore, not deductible.

Other relevant comments

Due to the ruling outcome being unfavourable, if the 20XX Income Tax Return (ITR) has been completed and you have not claimed these amounts you would need to object to the 20XX ITR Notice of Assessment (NOA), rather than the ruling outcome, this is explained in the fact sheet that we supply with the ruling document.