Edited version of private advice

Authorisation Number: 1052302560012

Date of advice: 7 October 2024

Ruling

Subject: Deductibility of travel, meals, accommodation and incidentals expenses

Question 1

Are you entitled to a deduction for your transport expenses when travelling between home and work under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

Question 2

Are you entitled to a deduction for your accommodation, meals and incidental expenses when working away from home under section 8-1 of the ITAA 1997?

Answer

No.

Question 3

Are you entitled to a deduction for your transport expenses when travelling between related workplaces under section 8-1 of the ITAA 1997?

Answer

Yes.

This ruling applies for the following periods:

year ended 30 June 20XX

year ended 30 June 20XX

year ending 30 June 20XX

year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You provide services to the public at your own business location (Workplace 1).

You also provide services to the clients of another entity at three of their locations (Workplace 2, Workplace 3 & Workplace 4).

When you travel to these different locations you take your own tools of trade and other items.

You also transport other items that you pick up enroute to the various workplaces.

You stay in accommodation near Workplace 3 and Workplace 4 when you travel to work in these locations. You incur expenditure for accommodation, meals and incidentals on these occasions.

You are not reimbursed for travel expenses incurred.

An indicative weekly schedule of your travel is as follows (but varies week to week based on demand at each locality):

Table 1: An indicative weekly schedule of your travel is as follows (but varies week to week based on demand at each locality):

Relevant legislative provision

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Question 1

Summary

The cost of your travel between home and work is incurred to put you in a position to perform your work rather than in the performance of your work. Your travel is private in nature and is therefore not deductible under section 8-1 of the ITAA 1997.

Detailed reasoning

You can deduct from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income, or it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income, except where the loss or outgoing is capital or private in nature (section 8-1 of the ITAA 1997).

The expenses of travelling between home and a place of work are generally not deductible as these expenses are of a private nature Lunney v FC of T; Hayley v FC of T (1958) 100 CLR 478, 7 AITR 166 (Lunney and Hayley).

Lunney and Hayley considered the issue of whether fares paid by taxpayers to enable them to go day by day to their regular place of work and back to their home are deductible. The Full High Court held that the costs of travel to and from a taxpayer's home and work or business are not deductible. The expenses are incurred in order to enable them to earn income but are not expenses incurred in the course of earning that income.

The principle in Lunney and Hayley (that the cost of travel between home and work is generally incurred to put you in a position to perform your duties, rather than in the performance of those duties) has been considered in numerous more recent decisions. These decisions confirm that the general principle is not altered by the availability of transport, the lack of suitable public transport, the erratic hours and times of the travel, or the 'on-call' nature of the work.

However, there are certain circumstances where it has been accepted that the cost of travelling between home and a regular place of work is deductible, such as:

•         where the taxpayer is required to carry bulky equipment

•         where the home can be regarded as a base of operations, or

•         where the taxpayer's work is itinerant.

Transporting bulky equipment

Where the nature of a taxpayer's work creates a practical necessity, explained by work duties, to transport bulky equipment to and from a regular place of work (including to and from home to a regular place of work), the expenses of transporting that bulky equipment to and from that regular place of work may be deductible. It is construed by the Commissioner as a narrow exception to the ordinary principle that travel from home to a regular place of work is private and therefore not deductible.

To come within this exception it is necessary that, amongst other things, that the equipment is bulky such that transportation by car or other private vehicle is the only realistic option. The question of what constitutes 'bulky' equipment must be considered according to the individual circumstances in each case.

In FC of T v. Vogt 75 ATC 4073, 5 ATR 274 (Vogt), the taxpayer was a professional musician who used his vehicle to transport bulky musical instruments and associated equipment from his home to his places of employment. It was found in Vogt that the taxpayer was entitled to a deduction for home to work travel expenses as he was using his vehicle for work related purposes to transport bulky equipment.

In Crestani v. FC of T 98 ATC 2219; (1998) 40 ATR 1037 (Crestani), Senior Member J Block was of the opinion that the term 'bulky' should not be construed to refer only to an article of large size, such as the musical instrument subject to the decision in the Vogt's Case, but more aptly construed as similar to 'cumbersome' in the sense that it is not portable. In Crestani, the tribunal was of the opinion a toolbox was 'bulky'; it was not easy to lift and could not be carried for any distance. The toolbox measured 57 cm x 28 cm x 25 cm (that is, having a volume of about 0.04 cubic metres) and weighed 27 kg. The toolbox was considered as 'bulky', in the sense of 'cumbersome', and the transport cost was 'attributable' to the transportation of such bulky equipment rather than private travel between home and work.

Conversely, in Case 43/94 94 ATC 387 (Case 43/94), a flight sergeant with the Royal Australian Air Force was denied a deduction for the cost of transporting his flying suit and other items used for work purposes. These items were carried in:

•         a duffle bag measuring 75 cm long, 55 cm wide, 50 cm deep and weighing 20 kilograms when packed

•         a suit bag which weighed 10 kilograms when packed, and

•         a briefcase-sized navigational bag which contained charts, work manuals and study materials.

It was held that the mode of transporting the items was simply a consequence of the means adopted by the taxpayer to convey him to work. It was considered that the items transported were not of sufficient size or weight to impede transport.

It is acknowledged that when you travel to the different locations where you work you take your own various tools of trade and other items.

However, the items that you transport are not considered to be sufficiently cumbersome or heavy to be considered bulky, such that your circumstances can be distinguished from the taxpayers in Vogt and Crestani. Your circumstances are comparable to the taxpayer in Case 43/94, in that the items you transport are not of a size or weight that would impede transport.

Home as a base of operations

A taxpayer's home may constitute a base of operations if their work commences at or before the time of leaving home to travel to work and the responsibility for completing it is not discharged until the taxpayer attends at their regular place of work. Whether a taxpayer's home constitutes a base of operations depends on the nature and extent of the activities undertaken at home.

In your case, when you are travelling from your home to your various regular work locations you do not commence your work before leaving home - you are simply travelling from home to work. Your work does not commence until you arrive at the location.

Itinerant work

The ITAA 1997 does not provide a definition of the word 'itinerant'. In the absence of a statutory definition, we must look to the ordinary usage of the word. The Macquarie Dictionary defines 'itinerant' as 'travelling from place to place' or 'one who travels from place to place especially for duty or business'.

In FC of T v. Genys (1987) 17 FCR 495; 87 ATC 4875; (1987) 19 ATR 356 the Federal Court held that the taxpayer's employment was not itinerant. The taxpayer was a registered nurse who used an employment agency to seek relief work with various hospitals. She was not continuously employed by any one hospital. When a hospital was in need of additional staff they contacted the agency which would then contact the taxpayer. It was integral to the decision in this case that the taxpayer did not travel after the commencement of her duties. She merely travelled to work and home again. Northrop J (FCR at 498; ATC at 4879; ATR at 359) described itinerant as 'shifting places of work':

'...where the taxpayer travels between home and shifting places of work, that is, an itinerant occupation.'

The question of whether a taxpayer's work is itinerant is one of fact, to be determined according to individual circumstances. It is the nature of each individual's duties and not their occupation or industry that determines if they are engaged in itinerant work.

Indicators of itinerancy include:

•         travel is a fundamental part of the work, and

•         the existence of a 'web' of work places exists such that the taxpayer continually travels from one work site to another, regularly working at more than one work site before returning to his or her usual place of residence.

Conclusion

In your case, the items that you transport are not considered bulky. In addition, travel is not a fundamental part of your work and your our income earning activities do not commence until you arrive at work each day. While you perform your work at a number of locations each of these places of work are considered to be regular places of work, such that travelling between them and your home is characterised merely as part of the necessity of travelling to and from work.

The usual position that the cost of travel between home and a regular place of work is not deductible does not change merely because:

•         a taxpayer's home is very distant from their regular place of work

•         a second or subsequent regular place of work is distant to the taxpayer's home, or

•         the taxpayer stops enroute to their regular place of work to fulfil an incidental work task. For example, a dentist calling into a dental laboratory to collect dentures on their way to the surgery.

The costs of travel between your home and work are incurred to put you in a position to perform your work, rather than in the performance of that work. The expenses are not considered to have been necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income. In addition, the expenses are considered to be private in nature. As such, you are not entitled to a deduction for your transport expenses when travelling (in either direction) between the following locations:

•         your home and Workplace 1

•         your home and Workplace 2

•         your home and Workplace 3

•         your home and Workplace 4

•         Workplace 3 and a motel, and

•         a motel and Workplace 4.

Question 2

Summary

The accommodation and living expenses are a prerequisite to the earning of assessable income. They are incurred in order to enable you to earn income but are not incurred in the course of gaining or producing that income. You have made a choice to reside at a place far from where you work. The expenses you incur for meals, accommodation and incidentals arise from this choice and not from your income earning activities. The expenses are private in nature and not deductible under section 8-1 of the ITAA 1997.

Detailed reasoning

You can deduct from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income, or it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income, except where the loss or outgoing is capital or private in nature (section 8-1 of the ITAA 1997).

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) considers the deductibility of accommodation and food. While this ruling is in relation to employees the principles in it apply equally to taxpayer's carrying on a business.

Paragraphs 14 to 15 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.

Furthermore, paragraphs 25 to 27 of TR 2021/4 state:

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.

26. In these circumstances, the expenses are incurred because the employee's personal circumstances are such that they keep their usual residence, rather than relocate. The occasion of the outgoing for accommodation and food and drink is not found in the employee's income-producing activities, meaning that these expenses are not incurred in the course of gaining or producing the employee's assessable income. They are private and domestic in nature.

27. This also applies where an employee regularly works at a particular location for one or more days each week. A particular location where an employee works regularly is a regular place of work.

Therefore, accommodation and meal expenses incurred while working away from home are essentially living expenses of a private or domestic nature and therefore are not deductible.

ATO ID 2002/829 (withdrawn) Income Tax: Deduction - Meals, accommodation and incidental expenses for plant operator (ATO ID 2002/829) was not withdrawn because it was considered incorrect. It was withdrawn because the ATO view on the issue considered in it is now contained in TR 2017/D6 Income tax and fringe benefits tax: when are deductions allowed for employees' travel expenses? (subsequently issued as TR 2021/1 Income tax: when are deductions allowed for employees' transport expenses?).

In ATO ID 2002/829 the taxpayer was a self-employed earthmoving plant operator whose work was carried out at various rural properties. These properties were usually hundreds of kilometres away from the taxpayer's normal place of residence. The taxpayer owned a caravan, which was transported to each property and in which the taxpayer resided whilst away from their normal place of residence. No allowance was received from the taxpayer's employers/contractors for meals, accommodation or incidental expenses. Deductions for the taxpayer's meal, accommodation and incidental expenses were disallowed as they did not have a sufficient connection with his income producing activities. The extra expenses of food and accommodation were considered to be of a private and domestic nature as the taxpayer had chosen the location of their normal place of residence.

The decision in ATO ID 2002/829 is based on the Federal Court decision in FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 (Toms case) where the court disallowed a forest worker's deduction for the cost of maintaining a caravan and other living expenses. The taxpayer incurred the expenses in providing temporary accommodation at the forest base camp because the taxpayer had chosen to reside at a place far from the worksite. These expenses were dictated not by work but by private considerations.

Your circumstances are comparable to the taxpayers in Toms case and ATO ID 2002/829 in that you have chosen to reside at a place far from where you work. The expenses you incur for meals, accommodation and incidentals arise from this choice and not from your income earning activities. The expenses are private in nature and not deductible under section 8-1 of the ITAA 1997.

Question 3

Summary

You are entitled to a deduction for the cost of your travel between Workplace 1 and Workplace 2 as these 2 work locations are related places of work.

Detailed reasoning

You can deduct from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income, or it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income, except where the loss or outgoing is capital or private in nature (section 8-1 of the ITAA 1997).

In contrast to transport expenses between home and a regular place of work, expenses of travelling between related places of work, neither of which is the taxpayer's home, are ordinarily deductible provided that it is the work that is the occasion for the expenses. This includes different workplaces of the same business and other locations where the business is carried on.

A taxpayer is not entitled to claim a deduction for travel between two unrelated places of work under section 8-1 of the ITAA 1997. As explained by the High Court in FC of T v Payne 2001 ATC 4027 (Payne), the deduction is denied because the travel does not occur when the taxpayer is engaged in either activity and therefore it could not be said that the expenses are incurred 'in the course of' deriving income from either activity. Payne involved a taxpayer who was a pilot employed in Sydney while living on his family property near Tamworth in NSW where he carried on a deer farming business. He claimed deductions for travel between the place of business (being the deer farm) and the place of work where he was an employee pilot. The High Court denied the deduction for the reasons outlined above.

In your case, when you are travelling between Workplace 1 and Workplace 2 you are travelling between 2 related places of work.

As such, the transport expenses you incur for this travel are deductible under section 8-1 of the ITAA 1997.