Edited version of your written advice

Authorisation Number: 5010049757637

Date of advice: 28 May 2018

Ruling

Subject: Company employee travel

Question

Are you entitled to a deduction for the costs of an employee travelling between a home workplace and another workplace?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 201X

Year ended 30 June 201X

The scheme commenced on

1 July 201X

Relevant facts

You are a company which used to contract to a number of head companies. It is a company with one director and one shareholder, who is also an employee.

In the past few years and all of the company income has been distributed to the director, either as salary or as attributed income.

When the company finished with its then current contract, the director retired, and together with his family moved interstate.

The director was then approached by a company with whom the company had previously contracted, to provide additional services.

Subsequently, the company was employed for 8 months by the previous client company to manage a number of projects.

You had a number of project managers reporting to you, and you reported directly to the director of the client’s business unit.

Your employee was able to work from his home office; he was required to travel to the interstate client if issues arose to the program of work, for governance meetings with senior executives and when the program required direction.

Travel costs incurred included return flights, hotel accommodation, a daily allowance for meals and incidentals, hotel accommodation, taxi, train and airport parking.

The company has paid the expenses for the employee.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

General principles for deductibility of travel expenses

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 the course of gaining or producing assessable income, but are not allowable to the extent that they are of a capital, private or domestic nature.

It is settled law that expenses of travelling to work are not deductible as they are not incurred in gaining the assessable income, but as a pre-requisite to gaining assessable income.

In considering the deductibility of travel expenses a distinction is made between travel ‘to work’ and travel ‘on work’. It is only if the duties of the job require a taxpayer to travel that the taxpayer's expenses can be deducted (Taylor v. Provan 1975 AC 194).

The case of Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 7 AITR 166; (1958) 11 ATD 404 settled the principle that travel to and from work is ordinarily not deductible. The Full High Court held that costs incurred by a taxpayer in travelling to the place where they work are expenses incurred in order to enable them to earn income but are not expenses incurred in the course of earning that income. The travel is considered to be of an essentially private or domestic nature.

Generally the expenses of travel to and from work are not deductible. This is either because such expenditure is private in nature, or because it is not an expense incurred in gaining or producing assessable income.

Taxation Ruling IT 2199 states a deduction is allowable for the cost of travelling directly between two places of business. This is provided that the travel is undertaken for the purpose of engaging in income-producing activities.

Alternative workplace

A deduction in relation to home to work travel has been allowed where a taxpayer travels from their first workplace to an ‘alternative’ workplace and then from this alternative workplace to home. In this case, a taxpayer can claim for the travel costs incurred both between the two workplaces and between the second workplace and home.

As outlined in paragraphs 145-148 of Taxation Ruling TR 95/14 Income tax: employee teachers - allowances, reimbursements and work-related deductions, an ‘alternative’ workplace is distinguished from a taxpayer’s ‘normal’ work place, such as when a teacher is required to travel from their school to an administrative centre (paragraph 146).

Application to your circumstances

In your case, your employee has travelled between his home office and a workplace in an interstate city. This is considered travel ‘on’ work.

It is accepted that the travel has a direct nexus to producing your employee’s assessable income.

Therefore your employee’s transport, accommodation and meal and incidental expenses are wholly deductible under section 8-1 of the ITAA 1997.