Issue
Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for accommodation expenses incurred because they live a long distance from their work place?
Decision
No. The taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for accommodation expenses incurred because they live a long distance from their work place.
Facts
The taxpayer lives a long distance from their work place.
So that they can arrive at work on time they choose to stay at employee quarters provided by their employer for a few nights each week.
The taxpayer incurs a cost for this accommodation.
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, or relate to the earning of exempt income.
Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example unless one arrives at work it is not possible to derive income. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income. Rather, the expenses are incurred to enable the taxpayer to commence income earning activities ( Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; [1958] HCA 5; (1958) 11 ATD 404; (1958) 7 AITR 166).
The accommodation expenses incurred by the taxpayer enable them to stay in proximity to their work place and arrive at work on time. They are a prerequisite to the earning of assessable income and are not expenses incurred in the course of gaining or producing that income.
Further, the essential character of the expenditure is of a private or domestic nature as it arises due to the taxpayer's choice of where to live and at what distance from work.
The taxpayer will therefore not be entitled to a deduction for their accommodation expenses under section 8-1 of the ITAA 1997.
Amendment History
Date of Amendment Part Comment 11 December 2015 Reasons for Decision Insert medium neutral citation. Case References Insert medium neutral citation.
Date of Amendment | Part | Comment
11 December 2015 | Reasons for Decision | Insert medium neutral citation.
Case References | Insert medium neutral citation.