Edited version of private advice

Authorisation Number: 1052382182803

Date of advice: 29 April 2025

Ruling

Subject: Work related expenses - motor vehicle expenses

Question

Are travel expenses incurred outside of your working hours, deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

You voluntarily undertook travel outside of your normal working hours. As you did not incur the travel expenses in the course of earning your assessable income, they are not deductible.

This ruling applies for the following period:

Year ended 30 June 20YY

The scheme commenced on:

1 July 20YY

Relevant facts and circumstances

On DD MM 20YY, you commenced full-time employment with Company A.

You are employed in Position A with Company A.

Your usual place of work with Company A is located at Office A.

You may also be required to travel to another temporary place of work to carry out the responsibilities of your position. The other centres are in Office B and Office C.

You are a Shift worker and work on a rotating roster basis.

You receive and process calls from the public, doctors, hospitals and other agencies and make critical decisions to ensure swift and accurate dispatch of services.

You are required to have map reading abilities and problem-solving skills to determine locations quickly and under pressure.

Your role requires computer literacy, strong interpersonal skills and the ability to work with a wide range of stakeholders.

You state to effectively carry out your duties you are required to have an in-depth knowledge of an area (main roads, buildings, key landmarks and specific locations in State A) to make informed decisions when handling calls and directing resources to the appropriate locations.

You have voluntarily undertaken, outside of your work hours, travel in your personal vehicle to better understand the layout of the regions you cover.

You have logged and recorded this travel.

You have undertaken this travel to ensure, when faced with situations you can respond quickly knowing the most efficient routes, ultimately helping to reduce response times and improve service.

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 losses and outgoings to the extent to which they are incurred in the gaining or producing assessable income except when the outgoings are a capital, private or domestic nature.

Taxation Ruling 2020/1 Income tax: employees: deductions for work expenses under section 8-1 of the Income Tax Assessment Act 1997 (TR 2020/1)explains, an employee can only deduct a work expense under section 8-1 of ITAA 1997 to the extent that:

•         it is incurred in gaining or producing assessable income

•         the expense is not a loss or outgoing of capital

•         the expense is not private or domestic in nature

•         the expense is not incurred in relation to gaining or producing exempt or non-assessable non-exempt income

•         another provision of the tax law does not prevent deduction of the expense.

Paragraph 8 of TR 2020/1 advises that the following elements of the positive test of section 8-1 of ITAA 1997, that:

•         the expense must be incurred

•         it must be incurred in gaining or producing assessable income, which:

­   involves consideration of all the facts and circumstances of the expense and its connection to income-earning activities

­   means in the course of gaining or producing assessable income

­   required a proper understanding of the relevance of employer requirements

•         an amount is only deductible to the extent incurred in gaining or producing assessable income.

Paragraphs 13-15 of TR 2020/1 details the pivotal element of section 8-1 for work expenses is that the requirement that expenses be incurred 'in gaining or producing assessable income'. The High Court majority in Payne said it is well established that these words are to be understood as meaning incurred 'in connection with' or for the purpose' of deriving assessable income

The majority further stated that the meaning of 'in the course of' gaining or producing income as amplified in Ronpibon Tin NL where it is held that:

... to come within the initial part of [section 8-1] it is both sufficient and necessary that the occasion of the loss or outgoing should be found in whatever is productive of the assessable income, or if none be produced, would be expected to produce assessable income ...

While the High Court authority indicates the nature of the connection that needs to be found between outgoings and assessable income, the sufficiency of the connection in a given case cannot simply be determined by reference to a precise formula. Section 8-1 is expressed in such terms that it is intended to cover any number of legal or factual situations. In many cases, only proper consideration of all the relevant facts and circumstances will reveal whether the occasion of a particular outgoing is to be found in what produces assessable income.

Paragraphs 26-28 of TR 2020/1 explains a common issue relating to the deductibility of employee expenses is the relevance of express or implied conditions of employment. In this regard a question that frequently arises is whether an expense becomes deductible merely because an employer specifically requires the employee to incur the expense.

In these circumstances, the employer's requirements do not determine the question of deductibility, this question is always to be answered by reference to the statutory test which involves an objective determination of the connection between the expense and the employee's income-earning activities.

For example, an expense that is private in nature or only a prerequisite to the earning of income does not become deductible only because of an employer's requirement.

Even if an expense meets the positive test, a deduction cannot be claimed if it fails one of the negative tests. The negative tests are whether an expense is:

•         capital or capital in nature

•         private or domestic expense

•         incurred in gaining or producing exempt income.

Paragraph 11 of Taxation Ruling TR 2021/1 Income tax: when are deductions allowed for employees' transport expenses? (TR 2021/1) states where the occasion of transport expenses can be found in the employee's employment duties, the expenses will be incurred in gaining or producing the employee's assessable income.

Paragraphs 16-19 of TR 2021/1 conveys while transport expenses will only be deductible if they satisfy the requirements of section 8-1 the following factors would support a characterisation of transport expenses being incurred in gaining or producing assessable income:

•         the travel fits within the duties of employment, that is, the obligation to incur transport expenses arises out of the employment itself and not the employee's personal circumstances

•         the travel is relevant to the practical demands of carrying out the employee's work duties, or role, that is, the transport expenses are a necessary consequence of the employee's income-producing activity.

In addition to the above factors, the following factors may also be relevant in determining whether a transport expense is incurred in gaining or producing assessable income:

•         the employer asks for the travel to be undertaken

•         the travel occurs on work time

•         the travel occurs when the employee is under the direction and control of the employer.

The factors identified in the above paragraphs need to be considered in the context of both the form and substance of the specific employment arrangement. No single factor on its own with support a conclusion that an expense is deductible. For example, the mere fact that an employer asks the employee to attend their regular place of work on a particular day does not change the conclusion that such travel is a prerequisite to the employment, rather than being incurred in gaining or producing assessable income.

However, the deductibility of a transport expense requires a complete assessment of the relationship between the employment and the expense. The fact that an employee considers a transport expense serves an employment-related purpose is not sufficient to establish the deductibility of the expense.

Application to your circumstances

In applying this to your circumstances, you are voluntarily undertaking travel outside of your work hours, in your personal vehicle to obtain knowledge of the regions that you cover in your role. This is not stipulated as a requirement in your position description, rather there is a requirement to be computer literate and to have the ability to read a map to direct vehicles to the correct area and locations.

Therefore, you are not eligible to claim a deduction for the expenses incurred as this travel as it was not incurred in the course of gaining or producing your assessable income.