Edited version of private advice

Authorisation Number: 1052280985351

Date of advice: 26 July 2024

Ruling

Subject: Motor vehicle expenses - logbook

Question 1

Is travel from home to different work sites tax deductible?

Answer

No.

Question 2

Is travel between different work sites and regular place of work during the working day tax deductible?

Answer

Yes. Expenses of travelling between work locations, neither of which is the employee's home are ordinarily tax deductible, provided that the employment is the occasion for the expense. This would include different workplaces of the same employer, clients of the employer and other locations where the employee carries out their employment duties.

This ruling applies for the following period:

30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are employed by XXX Developments as a Project/Development Manager.

You are required to travel from site to site for meetings and inspections to ensure the smooth delivery of projects.

These sites and projects are in different locations and multiple site visits are required on a daily basis.

Public transport is not an option, due to the time and some of the sites are new developments and a distance from public transport.

You employer does not provide a company car, the expectation is that you will use your own car to travel between the sites.

You own the car that you are claiming the expenses.

You are able to substantiate the car expenses with a valid logbook.

Your employment contract specifies two work sites:

•         Head Office

•         Worksite.

Your employment contract states that you may be directed to work at different locations from time to time.

You travel to different worksites to those listed in your contract; multiple visits can be required on a daily basis and vary dependant on the project.

Travel is a fundamental part of your employment.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Taxation Ruling 2021/1

Taxation Ruling 95/34

Taxation Ruling 95/22

Reasons for decision

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.

Question 1

Paragraph 9 of Taxation Ruling 2021/1 Income Tax: when are deductions allowed for employees' transport expenses? advises, for an expense to be incurred in gaining or producing assessable income it is both sufficient and necessary that the occasion for the expense should be found in whatever is productive of assessable income.

Paragraph 10 of TR 2021/1 provides if the transport expenses incurred by an employee meet the requirements of section 8-1, the applicable substantiation requirements must also be satisfied for the employee to claim the expense as a deduction.

Travel to a regular place of work

Paragraphs 21-23 of TR 2021 advises:

'... an employee's costs of travelling between home and a regular place of work are not deductible. Such costs are not incurred in the course of gaining or producing the employee's assessable income. They are explained by where the employee lives in relation to where they report for work. Transport expenses incurred in travelling between an employee's home and their regular place of employment are private in nature.

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. ... This is because the travel itself is a prerequisite to commencing work duties.

Similarly, where the employee travels to their regular place of work from another location in which they undertake private activities, for example a café, the cost of travel is not deductible. Such expenses are not deductible as they are not incurred in the course of earning assessable income'.

Paragraph 27 of TR 2021/1 provides that in some employment arrangement 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.

Paragraphs 63-67 of TR 2021/1 discuss the details of commencing or finishing duty at transit points.

'Sometimes the location where an employee reports for work will be different to where they carry out their substantive duties. The employee will travel to a place (a transit point) from which further travel is needed to reach the place their substantive duties are carried out.

In these cases, the cost of travel between home and where the employee regularly reports for work at the transit point is not deductible as it is a prerequisite to gaining or producing their assessable income. However, the cost of travel between the transit point and the place where they carry out their substantive duties will be deductible where it can be said that the employment is the occasion of the expense.'

The contract of employment, any applicable award and the practical needs of the employment should also be considered. The need for a transit point must fit with what would reasonably be expected by the duties of employment and not the private characteristics of the employee, for example, where they live in relation to where they report for work.

When considering if the cost of travel from a transit point is deductible, it is also relevant, but not determinative to consider where the employee commences their employment, and whether the employee is under the direction and control of the employer at that time. The need to be under direction and control must be explained by the duties of employment and the need to travel for work.

TR 95/22 Income tax: employee building workers - allowances, reimbursements, long service payments, redundancy trust payments and work-related deductions, advises that transport expenses include public transport fares and the running cost associated with motor vehicles, motorcycles, bicycles etc for work related travel. The treatment of transport expenses incurred by a building worker is considered below:

'Travel between home and work: A deduction is not allowable for the cost of travel between home and the normal workplace as it is generally considered to be a private expense. This principle is not altered by the performance of the incidental tasks en route. The principle is also not altered if the building worker is required to have a car available at work, uses the car because using public transport is impracticable, or is required to travel to work outside normal hours.

Paragraph 130 of TR 95/22 provides ... that the cost of travelling between home and work is generally incurred to put the building worker in a position to perform duties of employment rather than in the performance of those duties.

Paragraph 131 of TR 95/22 - provides the High Court's decision where travel expenses were incurred between home and work. In Lunney's case Williams, Kitto and Taylor JJ stated that (CLR at 498-499; ATFD at 412-413):

'The question whether the fares which were paid by the appellants are deductible under section 51 should not and, indeed, cannot be solved simply by a process of reasoning which asserts that because expenditure on fares from a taxpayers residence to his place of employment or place of business is necessary if assessable income is to be derived, such expenditure must be regarded as "incidental and relevant" to derivation of income...But to say expenditure on fares is a prerequisite to the earning of a taxpayers income is not to say that such expenditure is incurred in or in the course of gaining or producing his income'.

We do not consider that you commence work when you leave your home to travel to work or to a worksite. Therefore, you are unable to claim a deduction for travel between your home and workplace as this is considered to be a private expense.

Itinerant Worker

Travelling between home and shifting places of work: A deduction is allowable for the transport expenses incurred in travelling between home and shifting places of work, where the building worker is required by the nature of the job itself to do the job in more than one place. The mere fact that a building worker may choose to do part of the job in a separate place from that where the job is located is not enough.

Paragraphs 152-158 of TR 95/22 provides 'that many building workers may be engaged in itinerant work from time to time. However, this does not mean that the costs of travelling between home and work will always be an allowable deduction for building workers. It is the circumstance of each particular taxpayer that determine whether he or she is entitled to a deduction'.

'Some of the cases that refer to shifting places of work (or itinerancy) are Horton v. Young (1972) Ch. 157; 47 TC 60 (Horton v. Young); Taylor v. Provan (1975) AC 194 (Taylor v. Provan); FC of T v. Weiner 78 ATC 4006; 8 ATR 335 (Weiner's case); Case R8 84 ATC 157; 27 CTBR(NS) Case 59 (Case R8); Case T106 86 ATC 1192; AAT Case 17 (1986) 18 ATR 3093 (Case T106); Case U29 87 ATC 229; AAT Case 32 18 ATR 3181 (Case U29); Case U97 87 ATC 584; AAT Case 68 18 ATR 3491 (Case U97); FC of T v. Genys 87 ATC 4875; (1987) 19 ATR 356 (Genys' case)'.

The characteristics present in this case but which were not found to support the allowance of a deduction for travel between home and work on the basis of itinerancy were:

(a)          being on stand-by or short notice contact for work (Genys' case);

(b)          having a settled pattern of employment (Case U97);

(c)          being a casual employee who works for different employers regularly (Genys' case);

(d)          the incurring of 'additional expenditure' to travel to work (Case U 29);

(e)          the taxpayer had a principal place of duty as a matter of routine, even though that may have hanged at intervals of several months (Case U 29);

(f)           the obtaining of work from an agency on a regular basis so that one regularly has different employers on different days (Genys' case)

In Case U97, B J McMahon (Senior Member), in commenting on Case T106, said (ATC at 588; ATR at 3495):

'several observations were made [in that case] to illustrate the web of workplaces that one would expect to find, particularly in a casual rather than a semi-permanent pattern, in order to categorise employment as itinerant.'

Senior Member McMahon went on to say:

'In my view, the circumstances of the present applicant are such that his settled pattern of employment cannot be regarded as itinerant, even though he is not required to serve at the same station for every day...There is not a web of workplaces...There is not the constant unsettled dispatch from one workplace to another, the element of uncertainty...'

Question 2

When defining what is travel between workplaces, subsection 25-100(2) of the ITAA 1997 includes a place where a taxpayer is "engaged in activities to gain or produce assessable income". Deductions are not available under section 25-100 for travel that involves a private residence (subsection 25-100(3)).

In addition, the deduction available under subsection 25-100(1) is limited to the transport expenses incurred in travelling between workplaces. The section cannot have application to travel "between the alternative workplace and home", as previously permitted by, for example, TR 95/22, namely:

'167. A deduction is allowable for the cost of travel from a building worker's normal workplace to other workplaces. The cost of travel from the alternate workplace back to the normal workplace or directly home is also an allowable deduction. This travel is undertaken in the performance of a building worker's duties. It is incurred in the course of gaining assessable income and is allowable as a deduction.

168. Example: David, a building supervisor, travels from his normal work site to his employer's head office to attend a meeting. After the meeting he travels directly home. The cost of each journey is an allowable deduction to David'.

Section 25-100 will apply in respect of the first leg of the journey by David, ie when he travels from his normal workplace to his employer's head office. However, it cannot apply to the return trip home because this leg of the journey does not meet the requirement in subsection 25-100(2) and is, in any event, excluded by subsection

25-100(3). Furthermore, a deduction is only available under subsection 25-100(1) for the return trip by David from the second workplace (head office) to the first (normal workplace) if the requirements of subsection 25-100(2) are satisfied. This is considered consistent with the decision in Lunney & Hayley v FC of T (1958) 100 CLR 478 where the cost of getting to and returning from an income-earning activity was held to be a private expense.

Application to your circumstances

The cost of travelling between home and work is generally incurred to put the employee in a position to perform duties of employment rather than in the performance of those duties. In your case you are not able to claim a deduction for home to work travel as it is considered to be a private expense as these costs are not incurred in the gaining or producing of your assessable income.

An itinerant worker is someone who travels from place to place and has no fixed place of work, with a degree of uncertainty of the location that you will be working. In your case, you have an office to go and specific worksites to visit, therefore, you are not an itinerant worker.

Whilst you are not able to claim a deduction for home to work travel, if you make trips from your workplace to alternative worksites during your working day you are able to claim these travel expenses. This is an allowable deduction as it is undertaken during the course of gaining your assessable income.

Logbook

Separate private from business use

If you use a motor vehicle for both business and private use, you must be able to correctly identify and justify the percentage that you are claiming as business use. The percentage that is for private use isn't claimable.

It is important to keep records, and you can use a logbook or diary to record private versus business travel.

Travelling between your home and your place of business is considered private use and is not deductible.

In addition to written evidence to substantiate car expenses, taxpayer's using the logbook method must support their claim by appropriate logbook records.

The first year in which car expenses are claimed using the logbook method, a logbook recording each business journey must be kept for a minimum continuous period of at least 12-weeks at any time in the year. Odometer records must also be kept showing the odometer reading of the car at the beginning and the end of the 12-week period.

The logbook must include for each business trip:

(a)  the date the trip began and ended;

(b)  odometer readings at the start and end of the trip;

(c)   kilometres travelled on the journey; and

(d)  the purpose of the trip.

The record must be made at the end of the trip or as soon as possible afterwards. Where 2 or more business journeys are made consecutively during the one day, only one logbook entry for that day is required.

In addition, the logbook must contain the following information:

(a)  when the 12-week period began and ended;

(b)  odometer readings at the beginning and end of the period;

(c)   total number of kilometres travelled during the period;

(d)  total number of business kilometres travelled during the period on trips recorded in the logbook; and

(e)  percentage of business kilometres to total kilometres.

The logbook should take into account all relevant matters including any variation in the pattern of the use of the car (eg for holidays).