Edited version of private advice

Authorisation Number: 1052348149366

Date of advice: 14 January 2025

Ruling

Subject: Deductibility - travel expenses

Question 1

Are you entitled to claim a deduction for any of your transport, accommodation and food expenses associated with your travel to Location B during your period of employment with your previous employer?

Answer 1

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

On XX/XX/20XX you were approached about fulfilling an employment role for Company A.

You were interviewed for the role by Person A and Person B and were told during this interview that the role would be 100% remote/home based.

Your Employment Agreement states 'The Company's operations in Australia operate under home-based working arrangements for all employees. As such, your primary place of work will be your home location'.

You are the first employee for Company A to be based in Location A.

Your Employment Agreement also details, under 'Place of work', that the Company provides a 'collaboration hub' (referred to as 'Hub') in Location B which is available for employees who need to utilise office space from time to time. It further states 'You may be required to work from the Hub or other locations from time to time or on an ongoing basis, or to travel within Australia or overseas as part of your role'.

Your Terms and Conditions of Employment states:

The Company will pay or reimburse you for reasonable travel and out of pocket expenses incurred in the performance of your duties which are properly substantiated with receipts and approved by the Company in accordance any expense policy which the Company has in place from time to time.

Your commencement date with Company A as stated in your Employment Agreement was XX/XX/20XX. Your employment with Company A ceased on XX/XX/20XX.

On or around XX/XX/20XX, Person A informed you of a monthly meeting in Location B. You were advised that you would be required to attend these meetings in person. You were advised that your employer Company A would not be covering the costs associated with travel to Location B for these meetings and that it would be at your own personal expense.

During your attendance in the week commencing XX/XX/20XX, Person A directed you to stay a further week in Location B in order to work on a project for which in person meetings were required. You were advised this would be at your own cost.

You were living in Location A at the time you were offered employment with Company A.

You were not required to meet in person with any of Company A's clients that may themselves be based in Location A.

You do not have anything in writing from Company A that specifies it is a requirement of your employment that you be based in Location A, as opposed to any other location, should that be your home.

When working from home you utilised an unused bedroom as your home office. All meetings with clients or colleagues were held remotely via video conferencing platforms.

With your Private Ruling application, you provided an itemised list of expenses incurred while travelling to the Location B Hub. Entries were listed under one of four categories of flight, hotel, transit, and food. The itemised list provides dates for each transaction, a brief description, and details the amount of the expense. The total expenses detailed on this itemised list is $XX,XXX.XX between the dates of XX/XX/20XX and XX/XX/20XX.

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.

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, contains the Commissioner's view on when an employee can deduct travel, accommodation, and food and drink expenses.

An employee may be able to deduct such expenses if they incur the expenses in gaining or producing assessable income and the expense is not of a capital, private or domestic nature (section 8-1 of the ITAA 1997).

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.

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 as such are not deductible under section 8-1 of the ITAA 1997.

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.

In respect of travel expenses, paragraph 20 of TR 2021/4 clarifies that where the expenses are incurred due to the employee's personal circumstances, in that they do not live close to where they gain or produce assessable income, the occasion of the outgoing will not be found in the employee's income producing activities.

Application to your circumstances.

You contend that the fact that you reside in Location A was one of several key factors behind the employment offer from Company A, that you were hired, in part because you reside in Location A. You were however, not required to meet in person with any of Company A's clients that may themselves be based in Location A.

You've stated you believed the location was favourable to Company A to have a representative in due to its time zone. However, the time zone difference between Location A and Location B where the Hub is located is only XX minutes.

You contend that your letter of offer states your primary place of work will be your home, and that this letter was addressed to you at your Location A home address. Your belief is that when read together, these two facts clarify that it was a requirement of your employment with Company A that you be based in Location A. However, you have nothing in writing that specifically states this.

Your Employment Agreement details a collaboration hub (referred to as 'Hub') that the Company maintained in Location B. This is described under the heading 'Place of work' and states that you may be required to work from the Hub on occasion.

Further, outside of the Hub, your employer does not maintain any other offices in other localities and so operates on a 'work from home' basis. There is no written evidence that specifically states your employer required that this 'home base' be in Location A. The choice of where you live is a personal one and was not mandated by your employer.

The transport, accommodation and food expenses you incurred for your travel to Location B were incurred as a result of your personal circumstances of where you chose to live and therefore are not deductible under section 8-1 of the ITAA 1997.