The ATO has released Draft Taxation Ruling TR 2017/D6 on the deductibility of employee travel expenses. This lengthy draft ruling covers transport expenses as well as expenditure incurred when travelling away from home (accommodation, meal and incidental expenses). The draft ruling sets out general principles for determining if a travel expense satisfies the requirements in s 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997): that is, whether the expense is incurred in gaining or producing assessable income and whether it is non-private, non-domestic expenditure.
These general principles are that:
- a transport expense is not deductible where the travel is to start work or depart after work is completed (ie ordinary home-to-work travel);
- a transport expense is deductible if the travel is undertaken in performing the employee's work activities; factors to consider include:
- whether the work activities require the employee to undertake the travel;
- whether there is payment to undertake the travel;
- whether the employee is subject to the employer's direction and control for the period of the travel; and
- whether these factors have been contrived to give a private journey the appearance of work travel;
- employee expenditure for accommodation, meal and incidentals is not deductible unless the work requires the employee to be away from home – this will be the case where it is reasonably necessary to incur the expense because of "special demands" or "co-existing work locations" travel undertaken in performing the employee's work, but such expenditure is only deductible to the extent that the work requires the employee to sleep away from home; and
- relocation expenses (both travel and accommodation) are not deductible.
The draft ruling defines "special demands" travel as travel between home and a regular work location where the journey, or part of it, is included in the activities for which the employee is paid under the terms of employment, and this is reasonable because of the special demands of the work (eg due to the remoteness of the work location). "Co-existing work locations" travel involves travel that can be attributed to the employee needing to work in more than one location, and the travel is directly between work locations, or between home and an alternative work location. Further, it must be reasonable to conclude that the travel is undertaken in performing the employee's work activities because of the requirement to work in multiple locations.
Taxation Determination TD 2017/19 sets out the amounts the ATO will treat as reasonable for the 2017–2018 income year in relation to employee claims for:
- overtime meal expenses – the reasonable amount is $30.05;
- domestic travel expenses – reasonable amounts are provided at three salary levels for:
- accommodation at daily rates;
- meals (breakfast, lunch and dinner); and
- deductible expenses incidental to travel;
- domestic travel expenses for employee truck drivers who have received a travel allowance and are required to sleep (take their major rest break) away from home – the reasonable amount is $55.30 per day; and
- overseas travel expenses – reasonable amounts are shown for cost groups to which a country has been allocated. Where travel is to a country that is not listed, the employee can use the reasonable amount for Cost Group 1 in the table for the relevant salary range. Reasonable amounts are provided at three salary levels for:
meals (breakfast, lunch and dinner); and
deductible expenses incidental to travel.