Deductions

1 Are you entitled to a deduction for your cost of meals and food purchases when away from home for work under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

1 No. Subject 2: Depreciation deductions Question 2 Are you entitled to a depreciation deduction for your camping and cooking equipment when away from home for work under section 40-25 of the ITAA 1997? Answer 2 No. This ruling applies for the following period : Year ended 30 June 20YY The scheme commenced on: 1 July 20YY

You were required by your employer to live within a certain distance of the worksite in order to fulfill the duties of your role. As you resided outside this specified distance you were required to find accommodation near the sites for the length of the project at that location. You worked at the following locations during the following periods: •                Location A from MM 20Y to MM 20YY and MM 20YY to MM 20YY. •                Location B from MM 20Y to MM 20YY. •                Over some months of 20YY you travelled the odd day from Location A to Location B to assist. You returned to your home on weekends. You provided documentation that indicated that your employer has stated that they were 'responsible for providing appropriate lodgings or accommodation' and that 'in your case, camping was the accommodation option provided'. You have confirmed that they didn't pay for your camping expenses and you were not given any other accommodation options by your employer. You incurred the cost of purchasing camping equipment.

You also incurred costs relating to equipment used to cook meals and store prepared food items, and food/meal costs that exceeded what you would have incurred if you had stayed at your primary residence. You didn't receive any living away from home allowances or reimbursements for the expenses you incurred. You camped at free camp sites at various locations rotating based on weather conditions staying within XX minutes of the work location so that you were nearby if anything happened. When you were working at Location A, you sometimes stayed in a motel at your own cost when the camp grounds were booked out. When camp sites and motels were not an option, during your time at Location B, you would camp in a friend's backyard.

Income Tax Assessment Act 1997 section 8-1 Income Tax Assessment Act 1997 section 40-25

Issue 1: Deductions You can deduct from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income, or it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income, except where the loss or outgoing is capital or private in nature (section 8-1 of the ITAA 1997). Taxation Ruling TR 2021/4 Income tax and fringe benefits tax: employees: accommodation and food and drink expenses, travel allowances, and living-away-from-home allowances (TR 2021/4) considers the deductibility of accommodation and food. Paragraphs 14 and 15 of TR 2021/4 state: 14. Living expenses are a prerequisite to gaining or producing an employee's assessable income and are not incurred in performing an employee's income-producing activities. Living expenses are also private or domestic in nature. This means that even if these expenses were incurred in gaining or producing assessable income, they still would not be deductible due to the application of paragraph 8-1(2)(b).

15. While living expenses must be incurred before any assessable income can be derived, a loss or outgoing is not incurred in gaining or producing an employee's assessable income merely because it is necessary. This is particularly relevant to living expenses. A person must eat and sleep somewhere, whether or not they engage in employment. Furthermore, paragraphs 25 to 27 of TR 2021/4 state: 25. An employee cannot deduct accommodation and food and drink expenses they have incurred where, due to their personal circumstances, they live far away from where they gain or produce their assessable income. These expenses are living expenses and are not deductible. 26. In these circumstances, the expenses are incurred because the employee's personal circumstances are such that they keep their usual residence, rather than relocate. The occasion of the outgoing for accommodation and food and drink is not found in the employee's income-producing activities, meaning that these expenses are not incurred in the course of gaining or producing the employee's assessable income. They are private and domestic in nature.

27. This also applies where an employee regularly works at a particular location for one or more days each week. A particular location where an employee works regularly is a regular place of work. Therefore, the cost of meals and food purchases incurred while living away from home for work are living expenses of a private or domestic nature and consequently are not deductible. They have been incurred due to your personal choices in relation to where to live and to take up employment with work locations situated far from your home. ATO ID 2002/829 (withdrawn) Income Tax: Deduction - Meals, accommodation and incidental expenses for plant operator (ATO ID 2002/829) was not withdrawn because it was considered incorrect. It was withdrawn because the ATO view on the issue considered in it is now contained in TR 2017/D6 Income tax and fringe benefits tax: when are deductions allowed for employees' travel expenses? (subsequently issued as TR 2021/1 Income tax: when are deductions allowed for employees' transport expenses? ).

In ATO ID 2002/829 the taxpayer was a self-employed earthmoving plant operator whose work was carried out at various rural properties. These properties were usually hundreds of kilometres away from the taxpayer's normal place of residence. The taxpayer owned a caravan, which was transported to each property and in which the taxpayer resided whilst away from their normal place of residence. No allowance was received from the taxpayer's employers/contractors for meals, accommodation or incidental expenses. Deductions for the taxpayer's meal, accommodation and incidental expenses were disallowed as they did not have a sufficient connection with their income producing activities. The extra expenses of food and accommodation were considered to be of a private and domestic nature as the taxpayer had chosen the location of their normal place of residence. The decision in ATO ID 2002/829 is based on the Federal Court decision in FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 ( Toms case

) where the court disallowed a forest worker's deduction for the cost of maintaining a caravan and other living expenses. The taxpayer incurred the expenses in providing temporary accommodation at the forest base camp because the taxpayer had chosen to reside at a place far from the worksite. These expenses were dictated not by work but by private considerations. Your circumstances are comparable to the taxpayers in Toms case and ATO ID 2002/829 in that you have chosen to take up employment in work locations situated far from your home. The cost of meals and food purchases you incur arise from this choice and not from your income earning activities. That is, these are living expenses incurred in living away from home to be close to your work locations rather than expenses incurred in the course of undertaking any duties of your employment. The expenses are private in nature and not deductible under section 8-1 of the ITAA 1997. Issue 2: Depreciation deductions

Division 40 of the ITAA 1997 provides a deduction for the decline in value of depreciating assets. These assets are defined as those with a limited effective life that are expected to decrease in value over time. The division ensures that taxpayers can account for the depreciation of their assets in their tax returns, thereby reflecting the wear and tear or obsolescence of these assets. Section 40-25 of the ITAA 1997 allows a deduction for the decline in value of a depreciating asset you hold, to the extent the asset is used for a taxable purpose. Taxable purpose is defined in paragraph 40-25(7)(a) to mean for the purpose of producing assessable income. Where an asset is held for a non-taxable purpose, no deduction is allowed under Division 40. Your camping and cooking equipment are depreciating assets. However, as discussed above, your costs for camping, meals and food to live away from home to be close to your work locations are not incurred in earning assessable income and are private in nature. A depreciation deduction is not allowable for the camping and cooking equipment as they were not used for a taxable purpose.