New ruling: When are deductions allowed for employees’ travel expenses?

New ruling: deductions for employees' travel expenses

Dan Hodgson and Hayley Lock examine the ATO's new draft ruling regarding employee travel expenses.

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Yesterday, the Australian Taxation Office (ATO) released Draft TR 2017/D6

Nothing like a nice meaty and universally applicable tax ruling to end the financial year with!

The draft ruling consolidates and updates a plethora of former ATO guidance for recent Court decisions, such as the John Holland case (John Holland Group Pty Ltd & Anor v FCT 2015 ATC 20-510), and contemporary work practices such as fly-in-fly-out (FIFO) and working from home arrangements.

The ATO bifurcates the analysis of deductibility between transport and other travel costs outlining four key considerations under each. See the table below.

Transport expenses Accommodation, meal and incidental expenses 
  • whether the work activities require the employee to undertake the travel
  • whether the employee is paid, directly or indirectly, to undertake the travel
  • whether the employee is subject to the direction and control of their employer for the period of the travel
  • whether the above factors have been contrived to give a private journey the appearance of work travel
  • the employee’s work activities require them to undertake the travel
  • the work requires the employee to sleep away from home overnight
  • the employee has a permanent home elsewhere, and
  • the employee does not incur the expenses in the course of relocating or living away from home

Other points of note include:

  • Introduction of the concept of ‘special demands travel’ considering the remoteness of the work location or the requirement to move continuously between changing work locations – this is a welcome acknowledgement of tricky issues raised by modern day work practices (eg FIFO)
  • Miscellaneous Taxation Ruling 2030 (about the difference between Living Away From Home and travelling in the course of employment) will be withdrawn – the safe harbor, 21-day distinction is not a feature of the new ruling.
  • The ruling will not replace TR 95/34 about the deductibility of transport expenses for employees carrying out itinerant work

While still lengthy, the ruling is well-drafted and the simplified language and structural format reflects a welcome improvement on previous rulings.

Almost all employers will have some form of staff travel expenditure. It will be critical to consider the implications of the draft ruling for your business in the context of the profile of your mobile population.

The ATO is accepting submissions. Please contact us if you would like to provide feedback on this draft ruling.

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