1 Can you claim a deduction for your motor vehicle expenses under section 8-1 of the Income Tax Assessment Act 1997 ?
1: No. This ruling applies for the following period : Year ended 30 June 20XX The scheme commenced on: 1 July 20XX
You accepted a position (the Role) offered by a local state authority (the employer) in relation a casual position where your starting point for each workday would be at the location where you completed the activities in relation to the Role (the shifts). The locations for shifts maybe varied by agreement subject to the operational needs of the employer and the employee's circumstances. You are contacted when there was a requirement to work on each occasion. Your work is a separate contract of employment that ceases at the end of that engagement. You may be directed to work at any of the numerous locations the employer has within the area controlled by the employer. You use your own car to travel from your home to the locations to undertake your shifts, with a shift in the morning and one in the afternoon during most weekdays, with exceptions for specified periods. You travel to from your home to the required location to commence your shift, returning to your home after the completion of each shift. You often work at different locations during your shifts on the same day and may be directed at the last minute to go to a different location. You are required to:
• have travel flexibility to travel to any allocated location by your employer • undertake specified activities at the locations during the shifts • take several items to the locations during your shifts (the items), with all items having poles, with the longest able to be shortened to less than two metres with a sign at the top, and the others having poles that are less than one metre in length with a flag. You store the items in your car given that you undertake your role in various locations, for ease of access and for security reasons. You store the items in your locked garage during the weekends. No secure storage is provided by your employer in relation to storing the items. You do not receive a travel or mileage allowance from your employer in relation to you undertaking the activities involved with the role. You have incurred expenses in relation to using your car to travel to and from your work locations. You do not receive a travel allowance or receive any reimbursement from your employer.
Income Tax Assessment Act 1997 section 8-1
Deductions 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. Taxation Ruling TR 2021/7 Income tax: when are deductions allowed for employees' transport expenses? outlines when an employee can deduct transport expenses under section 8-1 of the ITAA 1997.
Paragraphs 16 and 17 of TR 2021/7 provide the following factors which would support that the travel expenses were incurred in relation to the gaining or producing of assessable income: • the travel fits within the duties of employment, that is, the obligation to incur transport expenses arises out of the employment itself and not the employee's personal circumstances • the travel is relevant to the practical demands of carrying out the employee's work duties or role, that is, the transport expenses are a necessary consequence of the employee's income-producing activity; and • the employer asks for the travel to be undertaken, with the travel occurring on work time when the employee is under the direction and control of the employer. Lunney v. Commissioner of Taxation [1958] ALR 225; 1958 0311H HCA; 100 CLR 478; (1958) 11 ATD 404; (1958) 32 ALJR 139 ( Lunney case)
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 as follows. • The fact that certain expenditure, such as travelling to work, must be incurred in order 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 in the course of 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. The mode of transport, the availability of transport, the lack of suitable public transport and the necessity of travel are not factors that will alter the essential character of travel between home and work (Case V103, Case V111 and Case V131). Paragraph 79 of TR 2021/1 indicated that with limited exceptions, an employee's costs of travelling between home and their regular place of work are not deductible and we have considered the following in relation to your situation. Itineracy The Commissioner's views on who will be considered an itinerant worker are contained in Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses outlines when an employee is carrying out itinerant work. TR 95/34 highlights the following matters as indicating that a taxpayer's work is itinerant:
• travel is a fundamental part of the employee's work/duties • the existence of web of work places in the employee's regular employment, such as the employee has no fixed place of work; and • the employee continually travels from one work site to another. Less important but still relevant factors also include: • the employee has a degree of uncertainty of location in his/her employment • the employee's home constitutes a base of operations • the employee has to carry bulky equipment from home to different work sites, and • the employer provides an allowance in recognition of the employee ' s need to continually travel between different work sites. Paragraph 28 of TR 95/34 outlines that an employee may earn income by performing their duties at several work sites. The location of those sites may make it necessary to travel to the various sites. If an employee performs work at a single site and then moves to other sites on a regular basis, it would be considered that a 'web' of work places exists. In FC of T v. Wiener 78 ATC 4006 (1978) 8 ATR 335 ( Wiener case)
the taxpayer was required to attend four to five schools each day which constituted a 'web' of work places. Paragraph 37 of TR 95/34 provides that continual travel refers to the frequency with which an employee moves from one work site to another. It envisages that the employee regularly works at more than one work site before returning to his or her usual place of residence. If an employee stays at a particular work site for a short period, such as several days or a few weeks, they may still be regarded as engaged in itinerant employment provided their usual pattern of work involves continual travel to more than one work site before returning to their usual place of residence. In Case U97 the Tribunal stated that although the taxpayer was not required to serve at the same station for every day during the course of the year, his employment was not itinerant. Senior Member McMahon contrasted the taxpayer's travel with that of the teacher in Wiener's case and stated (ATC at 587-588; ATR at 3494-3495):
... this was regarded by the court as an essential feature of her employment. Had she not been required to attend at more than one school on any one day, it would seem that the court may well have taken a different view of the expenses claimed. The position of the taxpayer in that situation where 'the office or employment is of itself inherently an itinerant one and that the taxpayer may be said to be travelling in the performance of her duties from the moment of leaving home to the moment of return there' may be contrasted with the position of the applicant in the present case. Once having arrived at his outer station, he remained there until the end of his shift before returning home ... There was no evidence that his duties required him to use his car from an outer station as a base during the course of his shift. The nature of his employment while there certainly could not be said to be itinerant. In FC of T v Genys (1987) 17 FCR 495 87 ACT 4875 (1987) 19 ATR 356, Northrop J, in determining that the taxpayer was not required to travel in the course of her duties, said (FCR at 503-504; ATC at 4882-4883; ATR at 364):
The main distinction, which I draw, between this case and the factual situations referred to in Horton v Young and Wiener is that here, the taxpayer does not travel between two places of work after the commencement of her duties; she simply drives from home to work and back again. By contrast, in the situations referred to in Horton v Young , the taxpayer...travels from home to work, but also travels from that first place of work to other places of employment throughout the course of the day before his return home. ... the mere fact that the taxpayer in this case does not have a regular place of employment in the sense of a permanent employment at one hospital is not sufficient to take her outside the general principles expressed in Lunney . Whether an employee ' s work is itinerant is a question of fact depending on the nature of the duties performed. Bulky equipment
Paragraph 3 of the TR 95/34 outlines that a deduction may be allowable if the transport costs can be attributed to the transportation of bulky equipment rather than to private travel between home and work. If the equipment is transported to and from work by the employee as a matter of convenience or personal choice, it is considered that the transport costs are private, and no deduction is allowable. The basic requirements for a deduction to be allowed for the cost of transporting bulky equipment between a taxpayer's home and their place of work are detailed in paragraphs 63 and 64 of TR 95/35. Essentially the basic requirements detailed in the paragraphs referred to are: • the equipment is not being transported as a matter of convenience or personal choice • there is no secure storage for the equipment at the workplace, and • the equipment being transported is bulky. Even if no secure storage is available at the workplace, the equipment must also be shown to be bulky. There is no definition in the tax law as to what constitutes bulky equipment so case law must be taken into account when considering this issue.
The question of what constitutes bulky equipment was considered in FC of T v. Vogt 75 ATC 4073, 5 ATR 274 ( Vogt's Case ), the taxpayer was a professional musician who used his vehicle to transport bulky musical instruments and associated equipment from his home to his places of employment. The taxpayer kept his instruments and associated equipment at his home because it was essential that he practise on them, and it was the only practicable place to keep them. It was found in Vogt's Case that the taxpayer was entitled to a deduction for home to work travel expenses as he was using his vehicle for work related purposes to transport bulky equipment. The Court held that (ATC at 4078; ATR at 279): ... in a practical sense, the expenditure should be attributed to the carriage of the taxpayer's instruments rather than to his travel to the places of performance. The mode of his travel was simply a consequence of the means which he employed to get his instruments to the place of performance, that is by carrying them in the motor vehicle which he drove.
The extreme bulk of the equipment was a decisive factor in the above case. Justice Waddell considered the analogy of a violinist who kept his violin at home for safe-keeping and practice, and stated (ATC at 4078; ATR at 280) that the cost of travelling from his home to the place of performance: ... would not be deductible...it could not be said to arise from, nor could it be attributed to, the necessity of getting the violin to the place of performance. In Crestani v. FC of T 98 ATC 2219; (1998) 40 ATR 1037 ( Crestani's Case ), Senior Member J Block was of the opinion that the term 'bulky' should not be construed to refer only to an article of large size, such as the musical instrument subject to the decision in the Vogt's Case , but should be more aptly construed as similar to 'cumbersome' in the sense that it is not easily portable. In Crestani's Case
, the tribunal was of the opinion a toolbox was 'bulky'; it was not easy to lift and could not be carried for any distance. The toolbox measured 57 cm x 28 cm x 25 cm (that is, having a volume of about 0.04 cubic metres) and weighed 27 kg. The toolbox was considered as 'bulky', in the sense of 'cumbersome', and the transport cost was 'attributable' to the transportation of such bulky equipment rather than private travel between home and work. The employer did not provide a secure storage area for the toolbox and the use of public transport was not a viable option. Conversely, in Case 43/94 94 ATC 387 (Case 43/91), a flight sergeant with the Royal Australian Air Force was denied a deduction for the cost of transporting his flying suit and other items used for work purposes. These items were carried in: • a duffle bag measuring 75 cm long, 55 cm wide, 50 cm deep and weighing 20 kilograms when packed • a suit bag which weighed 10 kilograms when packed, and • a briefcase-sized navigational bag which contained charts, work manuals and study materials.
It was held that the mode of transporting the items was simply a consequence of the means adopted by the taxpayer to convey him to work. It was considered that the duffle bag was not of sufficient size or weight to impede transport. Paragraph 79 of TR 2021/1 stated that it is construed by the Commissioner as a narrow exception to the ordinary principle that travel from home to a regular place of work is private and thus not deductible. Paragraph 80 of TR 2021/1 provides that to come within this exception it is necessary that: • the equipment is essential for the performance of the employee's employment duties • the equipment is bulky such that transportation by car or other private vehicle is the only realistic option, and • transporting the items to and from their regular place of work is a practical necessity because there is no secure area for the storage of the equipment provided at the employee's regular place of work or the equipment needs to be transported to a different site each day.
Paragraph 81 of TR 2021/1 states however, that if equipment is transported by the employee as a matter of mere convenience or personal choice, the transport costs are private, and no deduction is allowable. Application to your situation We have taken the following into consideration when making the ruling on whether you can claim a deduction in relation to your travel expenses. You have incurred expenses in relation to using your car to travel from your home to the location where you are completing your shift. You have two shifts per day, being morning and afternoon shifts, which may be undertaken at different locations within the municipality of your employer. Your responsibility in relation to your role involves having travel flexibility to be able to travel to any allocated crossing within the municipality.
However, your employer does not ask for your travel to the locations of your shifts be undertaken in a specified manner, nor do they stipulate which mode of transport you should use, merely that you are able to get to the locations to complete your shifts. Your travel periods are not undertaken when you are under the direction and control of your employer as your employment commences when you start your shift at the location and ends at the end of your shift. Your employer does not provide you with a secure place to store the items and you store them in your car during weekdays, with some exceptions, and in your garage when not stored in your car. One of the items has a minimum height of less than two metres, with the other items having poles of less than one metre with a flag attached. While the items may be awkward to take on public transport, or carry for long distances, they are reasonably portable and are not comparable to the items considered in the Crestani Case . The items are not bulky such that transportation by car or other private vehicle is the only realistic option.
You often work at different locations during your shifts on the same day and may be directed at the last minute to go to a different location. However, you do not travel from your first shift location to other locations after the commencement of your duties during the day. Your home is not a place of employment with your employment not commencing until you reach the location for your shift. Your travel from your home to the location of your shift in the morning before returning home, and then do the same thing in relation to your afternoon shift. You have referred to the following in your ruling: • Crestani Case, as considered above. That case can be distinguished from your situation as the toolbox in that case was viewed as cumbersome and bulky given its size and weight, was not easy to lift and could not be carried for any distance. The items you take to the locations are not similar given that they are not as heavy, cumbersome or bulky and are more portable. • Yeates v Commissioner of Taxation
{2014] AATA 10 which involved a taxpayer who was senior pilot employed by Regional Express Holdings Ltd (REX) and was based at Sydney Airport. He flew the one aircraft type on scheduled passenger routes within New South Wales and occasionally flew interstate. He lived in an outer Sydney suburb and drove his car to and from the Mascot base when flying. The taxpayer indicated that he was obliged to drive his car because of the weight of documents and equipment he was required to take with him in the aircraft. His employer did not provide secure lock-up space for his equipment at the airport. At his home he had a study which contained a desk and computer, there was a television set supplying free-to-air and Foxtel programming in the living room and he had a landline telephone. When he arrived at the airport he had access to a computer, weather information and all details of his crew, route, load and fuel for the day. The taxpayer's claim for deductions in relation to his travel were disallowed by the AAT.
A copy of the decision for this case was provided with your ruling which provides at paragraph 28 that the Judge referred to three determinants of the essential character to the expense - it was incurred as part of the income earning operation, it was essential to the operation, and it was attributable to the carriage of the instruments. Decisions made in relation to the eligibility to claim travel expenses are made based on the facts of the taxpayer's individual situation by applying tax legislation, ATO Views which outline the how the Commissioner considers legislation operates in relation to specific situations, as referenced above, and court decisions. After considering the factors of your situation it is viewed that travel is not an essential feature of your duties. You undertake the travel to put you in a position to perform your duties of your employment; it is not incurred in the performance of the duties of your employment. Additionally, no exception applies in your situation to enable you to be entitled to claim a deduction for your travel expenses.
Therefore, you cannot claim a travel expense deduction for the expenses you incur in relation to using your car to travel to and from your shift locations while completing your school crossing supervisor role.