Travel costs in seeking employment

Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for travel expenses incurred in order to seek employment?

No. The taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for travel expenses incurred in order to seek employment.

The taxpayer is a casual employee. They are listed as available to work with various potential employers.

The taxpayer frequently travels to these potential employers in order to update their records as to the taxpayer's skills, experience and qualifications. The taxpayer believes that this increases their chances of gaining employment with these employers.

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.

The courts have considered the meaning of 'incurred in gaining or producing assessable income'. In Ronpibon Tin NL & Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 4 AITR 236; (1949) 8 ATD 431 the High Court stated that: 'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words "incurred in gaining or producing the assessable income" mean in the course of gaining or producing such income.'

The expenditure must therefore be related to the production of assessable income and not incurred at a point too soon to be deductible (FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541).

The taxpayer incurs travel expenses in order to increase their chances of gaining employment with these potential employers. These travel expenses relate to seeking employment and have been incurred at a point too soon to be regarded as being incurred in gaining or producing assessable income. Consequently, the taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for travel expenses incurred in order to seek employment.