Income tax: does the receipt of a travel allowance automatically entitle an employee to a deduction for travel expenses under subsection 51(1) of the Income Tax Assessment Act 1936 ?

No. The mere receipt of an allowance does not entitle an employee to a deduction, whether or not the allowance is received under an industrial award.

Some taxpayers and tax agents would appear to be confused as to whether a taxpayer receiving an allowance is automatically entitled to a deduction equal to the amount of the allowance.

Taxation Ruling IT 2543 explained at paragraph 7 that 'the receipt of an allowance imparts no greater degree of deductibility to an expense which is incurred in relation to that allowance'. Therefore, whether a deduction is allowable for travel expenses is a separate question, unrelated to whether a taxpayer receives a travel allowance.

Expenses of travelling between home and work are not an allowable deduction unless the exceptional circumstances outlined at paragraph 8 of IT 2543 exist.