Edited version of private advice

Authorisation Number: 1052310875688

Date of advice: 26 September 2024

Ruling

Subject: Work related expenses

Question

Are you entitled to a deduction for travel, accommodation and meals you incurred when attending your employer's office?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 2024

The scheme commenced on:

1 July 2023

Relevant facts and circumstances

You are employed full-time with Employer Z.

You have a contract with Employer Z.

Your contract states:

Clause 2 Location

You will primarily work from home. From time to time, you will be required to attend our offices on an ad hoc basis and/or to attend meetings, and provided any such office attendance requirements by the Company will be reasonable.

Clause 8. Total Fixed Remuneration

8.1 Your Total Fixed Remuneration (TFR) is detailed in Item 1 of Schedule A attached to this Agreement. It includes your base salary, superannuation contributions and any vehicle benefit you may receive during your employment. If the Company pays fringe benefits tax on your behalf, this payment will form part of your TFR.

Clause 15. Business Expenses

15.1 The Company will reimburse you for reasonable out of pocket expenses you incur in the performance of your work, provided that you obtain the approval of the Company prior to incurring such expenses. You must provide the Company with receipts and other documents to substantiate the expenses to the satisfaction of the Company.

15.2 Subject to the conditions of the relevant Group Entity policy, the Company may, at its discretion, provide you with a company credit card to use for business related purposes only. You agree that you will not incur personal expenses on any company credit card that you may be provided.

As of later last year, you attend the office a number of days per week for work-related activities, including meetings and training.

The expenses for these trips including travel, accommodation, and meals, were not reimbursed by your employer.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

According to section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), you can deduct a loss or outgoing if it is incurred in producing your assessable income except where the outgoing is of a capital, private or domestic nature.

The term 'incurred in gaining or producing assessable income' means incurred 'in the course of gaining or producing assessable income'.

For an expense to be incurred in gaining or producing assessable income it is both sufficient and necessary that the occasion of the expense should be found in whatever is productive of assessable income.

Taxation Ruling 2021/4 Income tax and fringe benefits: employees: accommodation and food and drink expenses, travel allowances, and living-away-from-home allowances (TR 2021/4) consider the deductibility of accommodation and food.

Accommodation and food and drink expenses are ordinarily private or domestic in nature and are generally not deductible under section 8-1.

Paragraphs 13-14 of TR 2021/4 states:

13. 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).

14. 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.

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.

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.

The courts have concluded that 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.

In the case Federal Commissioner of Taxation v. Charlton 84 ATC 4415; (1984) 15 ATR 711 (Charltons Case), the taxpayer was a pathologist employed to carry out autopsies for the local coroner in Bendigo. He rented a flat in Bendigo while maintaining a permanent family home in Melbourne, located approximately 150kms away. There was evidence that there was difficulty in finding motel accommodation in Bendigo and the taxpayer was reluctant to make the round trip back to Melbourne without rest. The taxpayer claimed that the rental expenses were incurred in the production of assessable income.

Justice Crockett of the Supreme Court of Victoria allowed the Commissioner's appeal and ruled:

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.

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.

This is supported by the decisions in Federal Commissioner of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466 (Toms Case), where the Federal Court held that expenses incurred in relation to accommodation near the workplace while maintaining a family residence in another location were not an allowable deduction as they were considered to be private expenses.

While some of these cases are not similar to your circumstances, they consider the wide range of circumstances where travel, accommodation and meals are not an allowable deduction.

You work from home most days for Employer Z.

Your employment contract at clause 2 clearly states that you are required to attend the office despite your home being primarily where you work from.

It is a requirement of your contract that you attend the office.

The travel, accommodation and meal expenses you incurred attending the office are private and domestic in nature and required as part of your employment.

These expenses are therefore not an allowable deduction under Section 8-1 of the ITAA 1997.