1 Are you entitled to a deduction for the costs associated with travel from your home to the airport and for parking?
1 No. This ruling applies for the following period : Year ended 30 June 20YY The scheme commenced on: DD MM YY
You are employed by Employer Z. You do not have a set roster, but you are expected to work a certain number of days out of the relevant period. Your primary work location is City Z. Clause 4 of your contract states: Should the employee be required to work at a base other than their primary location of work the company will provide any relevant travel, accommodation, and allowances for the duration of the duty as per the Employer Z Travel Allowance and Expense Reimburse Policy. Your work requires that you may need to work anywhere in Australia or overseas from time to time and you would leave from City Z in these instances. You travel from your home to your work base in City Z and you incur expenses associated with the travel and parking.
Income Tax Assessment Act 1997 section 8-1
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 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. Travel Expenses 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. A deduction is generally not allowable for the cost of travel by an employee between their home and their normal workplace as it is considered private in nature. The cost of such travel is generally incurred to put the employee in a position to perform their duties of employment, rather than in the performance of those duties (paragraph 77 of Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances, and reimbursements for transport expenses and paragraphs 21 to 23 of Taxation Ruling TR 2021/1 Income tax: when are deductions allowed for employees' transport expenses? ).
Lunney v. Commissioner of Taxation [1958] ALR 225; 1958 0311H HCA; 100 CLR 478; (1958) 11 ATD 404; (1958) 32 ALJR 139 introduced what is now regarded as the essential character test. This test requires that for an expense to be deductible, it must have the essential character of a business or income producing expense. The taxpayer in this case sought to deduct the cost of travelling from his home to his work. The expenses were disallowed as being private and domestic, establishing the broad principle that costs incurred because of living in one place while working in another cannot be regarded as deductible. The reasons given by the High Court were twofold. The fact that certain expenditure, such as travelling to work, must be incurred to be able to derive assessable income, does not necessarily mean that the expenditure is incidental and relevant to the derivation of assessable income. It is a prerequisite to the earning of assessable income rather than being incurred while gaining that income.
The essential character of the travel to and from work is that of a private and domestic nature, related to personal and living expenses as part of the taxpayer's choice of where to live, in choosing to live away from and what distance from work. You are therefore not entitled to claim a deduction under Section 8-1 of the ITAA 1997 for the expenses associated with your travel from your home to your primary work location in City Z and the parking you incur. These expenses are private and domestic in nature and put you in a position to carry out your work duties as opposed to you travelling on work. The expenses are not an allowable deduction.