Edited version of private advice

Authorisation Number: 1052366079432

Date of advice: 4 April 2025

Ruling

Subject: Work-related expenses

Question

Are you entitled to a deduction for cost incurred for travel between your home office and your principal place of work under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

XX XX 20XX

Relevant facts and circumstances

On XX XX 20XX you became employed on a part-time permanent basis for Company A.

Your most recent Letter of Engagement, issued XX XX 20XX, states:

2.3 You will be required to perform your duties at Company A location or elsewhere as reasonably directed by your employer. You may also be required to travel off-site to undertake your duties on a regular basis.

2.4 Due to the changing nature of the Employers business, the Employer may need to make changes to your working arrangement during the course of your employment. This may include a change in work location or project or include a change to your role to meet the changing needs of the business.

Your employer is located at Company A location (principal place of work).

You drive to your principal place of work on an 'as needs' basis.

You primarily work from home, but drive to other workplaces which include:

•                     travel to your principal place of work,

•                     travel to other places in Suburb A, situated close to your principal place of work, or

•                     travel to other regional locations, not situated close to your principal place of work.

The purposes of these trips range from team meetings, special training and workshops and site inspections.

Your employer allows you the ability to work under flexible arrangements which include working from home.

Your work from home space is in your bedroom. It includes a table, chair, stool, laptop, stand for laptop and, a remote keyboard and mouse.

You have purchased a small fire hydrant and first aid kit in accordance with workplace health and safety requirements.

You do not conduct in person work meetings at home or have clients visit your home.

From XX 20XX you began travelling to Suburb A weekly for the purpose of in person managers meetings and in person team meetings.

Some meetings scheduled for your principal place of work were moved across the road due to space considerations.

Your activities when travelling to Suburb A are not similar to your work activities from your home location.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Section 8-1 of the 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.

The deductibility of transport expenses where the employee is travelling between home and a regular place of work has long been regarded as settled. With limited exceptions, such expenses are not deductible. Such costs are not incurred in the course of gaining or producing an employee's assessable income. This expenditure is regarded as a prerequisite to earning an employee's assessable income. 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.

Taxation Ruling IT 2199 Income tax: allowable deductions: travelling expenses between place(s) of employment and/or place(s) of business states the following at paragraph 4-6:

4. Claims for income tax deduction for expenses incurred in travelling directly between two places of employment, two places of business or a place of employment and a place of business should be allowed where the taxpayer does not live at either of the places and the travel has been undertaken for the purpose of enabling the taxpayer to engage in income producing activities.

5. Difficulty may arise where a taxpayer lives at one of the places of employment or business because it is not in all cases of this nature that an income tax deduction is allowable for the costs of travel between the employment or business carried on at his home and another employment or business elsewhere. It is not practicable to lay down a rule which is capable of application in all cases. At best some general propositions can be made as a framework within which individual cases may be determined.

6. It is necessary that the income producing activity carried on at the taxpayer's home should constitute an employment or a business. It is not sufficient that a room in the home is used in association with an employment or business conducted elsewhere. It is rare for a home to represent a place of employment. The more usual situation is for a self-employed person to use his home or part thereof as a base of business operations. Examples which come to mind are house painters, plumbers, electricians, etc. Furthermore, it is not uncommon for traders to live on the same premises as their stores and it is frequently the case that medical practitioners will conduct their practices from surgeries located at their homes.

TR 93/30 Income tax: deductions for home office expenses defines what constitutes a 'place of business' at paragraphs 5 and 11-13, which state:

5. The following factors, none of which is necessarily conclusive on its own, may indicate whether or not an area set aside has the character of a "place of business":

•                    the area is clearly identifiable as a place of business;

•                    the area is not readily suitable or adaptable for use for private or domestic purposes in association with the home generally;

•                    the area is used exclusively or almost exclusively for carrying on a business; or

•                    the area is used regularly for visits of clients or customers.

11. Paragraph 5 lists some of the factors which may indicate that a part of a home has the character of a place of business. The existence of any of these factors or a combination of them will not necessarily be conclusive in ascertaining the character of an area used as a home office. Rather the decision in each case will depend on whether, on a balanced consideration of:

•                    the essential character of the area;

•                    the nature of the taxpayer's business; and

•                    any other relevant factors,

•                    the area constitutes a "place of business" in the ordinary and common sense meaning of that term.

12. The absence of an alternative place for conducting income producing activities has also influenced a court or tribunal to accept a part of a taxpayer's residence as a place of business. Examples include:

•                    a self-employed script writer using one room of a flat for writing purposes and for meetings with television station staff (Swinford's Case);

•                    an employee architect conducting a small private practice from home (Case F53, 74 ATC 294; Case 65, 19 CTBR(NS) 452);

•                    a country sales manager for an oil company whose employer did not provide him with a place to work (Case T48, 86 ATC 389; Case 47, 29 CTBR(NS) 355).

In each of these cases the taxpayer was able to show that, as a matter of fact, there was no alternative place of business, it was necessary to work from home, and that the room in question was used exclusively or almost exclusively for income producing purposes.

13. In circumstances such as those referred to in paragraph 12, a place of business will exist only if:

•                    it is a requirement inherent in the nature of the taxpayer's activities that the taxpayer needs a place of business;

•                    the taxpayer's circumstances are such that there is no alternative place of business and it was necessary to work from home; and

•                    the area of the home is used exclusively or almost exclusively for income producing purposes.

Application to your circumstances

Based on the relevant taxation rulings a deduction is allowable for travel between a place of employment and your home if your home has the characteristics of a place of business. Whether an area of a home has the character of a 'place of business' is a question of fact.

The Commissioner is not satisfied that your home has the characteristics of a place of business based on the following:

•                     Your work contract stipulates that you are required to perform your duties at your principal place of employment. Therefore, you have a worksite provided to you by your employer.

•                     You have the capacity to work from your principal place of employment, but you choose to work from home.

•                     Your work area is in your bedroom, which is primarily used for private or domestic purposes within the home.

•                     Your work area is readily suitable for use for private or domestic purposes in association with the home.

•                     You don't see clients in your home in association with your employment.

•                     The essential character of your work area is that of a home office and not a place of business.

Therefore, the trips between your home and principal place of employment are not deductible.