Deductibility of food and accommodation expenses

Are food and accommodation expenses deductible to the taxpayer who is in a remote locality under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

No. Food and accommodation expenses are not deductible to the taxpayer who is in a remote locality under section 8-1 of the ITAA 1997 as they are private in nature.

The taxpayer is employed as a bus driver in a remote locality.

The taxpayer resides in the remote locality in accommodation provided by their employer.

The employer also provides food for the taxpayer.

The employer deducts an amount from the taxpayer's salary to cover the food and accommodation expenses.

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.

In FC of T v. Cooper 91 ATC 4396; (1991) 21 ATR 1616 the court held that additional expenditure on food and drink was excluded from deductibility as being of a private nature. Hill J stated that (ATC 4415; ATR 1638): 'Food and drink are ordinarily private matters, and the essential character of expenditure on food and drink will ordinarily be private rather than having the character of a working or business expense. However, the occasion of the outgoing may operate to give to expenditure on food and drink the essential character of a working expense in cases such as those illustrated of work-related entertainment or expenditure incurred while away from home.'

The taxpayer is provided with food and accommodation by their employer who deducts an amount from the salary of the taxpayer to cover those expenses. These expenses have no nexus with the income producing activities of the taxpayer and are private in nature.

Similarly, expenses for accommodation are not deductible unless it can be established that a specific part of the home is set aside or used for income producing purposes.

The taxpayer is therefore not entitled to a deduction under section 8-1 of the ITAA 1997 for the costs incurred on food and accommodation. The fact that the food and accommodation is provided by the employer or the taxpayer is in a remote locality does not change the nature of the expense.