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Travel and accommodation costs #4 – Transport expenses when travelling significant distances or multiple offices

Here in Canberra we have lots of people who love living in Canberra, but work in Sydney. They drive up, stay there two or three days and drive back… and they ALWAYS want to claim a deduction or the travel. What does the Commissioner say about this????

The mere fact that an employee lives a significant distance from their regular place of work does not make their transport expenses deductible. 

Have a look at this example from Taxation Ruling TR 2021/1 Income tax: when are deductions allowed for employees’ transport expenses?

Isabelle is a specialist technician who lives in Brisbane. She works as an employee for a company based in Sydney on a part-time basis. On the days she is required to work (Wednesdays and Thursdays), she drives from her home in Brisbane to the airport, catches a flight to Sydney and then a taxi to her company’s office. She stays overnight in Sydney on Wednesday night and returns home on Thursday evening. Isabelle’s transport expenses are not deductible. Isabelle’s travel is undertaken to put her in the position to commence her duties and the expenses are not incurred in gaining or producing her assessable income. 

The Commissioner also states that when the employee’s duties of employment necessarily require them to work with some regularity for the same employer at two or more locations that are geographically distant from each other, a question arises as to whether travel to both places ought to be characterised as private in nature, or whether travel to the more distant location for the performance of employment duties may instead be an incident of the employment. 

And another example from Taxation Ruling TR 2021/1 Income tax: when are deductions allowed for employees’ transport expenses?

Sue lives with her family in Sydney. Sue takes on a leadership role with a company that has offices all around Australia. The role is based in Melbourne and the duties attached to it can be primarily performed in Melbourne. However, Sue enters into an arrangement with her employer where she must attend the Melbourne office at least three days per week, but at her discretion (or choice) can work out of the Sydney office up to two days per week.

Although the Melbourne office is a distant work location and Sue carries out her duties at the Melbourne and Sydney offices, Sue’s travel from home to those offices will not be deductible. This is not a case where the role Sue undertakes necessarily requires travel to be undertaken. The substantive duties attached to Sue’s role do not require her to travel between Sydney and Melbourne. The travel is attributable to Sue’s choice to remain living in Sydney whilst taking on a Melbourne-based role. Sue is required to work in Melbourne, and, for convenience, she may also work part of the time in Sydney. The transport expenses incurred in travelling between Sydney and Melbourne are not incurred in gaining or producing her assessable income. The travel is better characterised as travel from home to a regular work location which is attributable to her private circumstances, that is, her choice about where to live rather than being a necessary incident of her employment.

The summary of both these examples is that if you live somewhere that is far away from your work by choice, there are no deductions for the travel.

By Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.

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