Draft Taxation Ruling TR 2019/D7

Summary – What this draft Ruling is about:

1. This draft Ruling sets out when an employee can deduct transport expenses under section 8-1 of the Income Tax Assessment Act 1997. This includes the cost of travel by airline, train, taxi, car, bus, boat or another vehicle.
2. This Ruling explains that transport expenses incurred for ordinary travel between home and a regular place of work are not deductible. In contrast, transport expenses incurred by an employee is traveling between work locations usually are deductible. This Ruling also explains a number of special cases or exceptions to these general rules.
3. This Ruling also applies for the purposes of the Fringe Benefits Tax Assessment Act 1986in determining whether such expenses paid by the employer would have been ‘otherwise deductible’ if incurred by the employee.
4. This Ruling does not address:

• The substantiation of transport expense.
• Transport expenses related to self-education or study – refer to Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in the business.
• The deductibility of parking fees.
• Employees carrying out itinerant work – refer to Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work – deductions, allowances and reimbursements for transport expenses..
• Fringe benefits tax generally, except for the application of the ‘otherwise deductible’ rule.

6. An employee can only deduct a transport expense under section 8-1 to the extent that:

• They incur the expense in gaining or producing their assessable income^[4]
• The expense is not of a capital, private or domestic nature
• The applicable substantiation requirements satisfied.

7. For an expense to be incurred ‘in’ gaining or producing an assessable income it is both sufficient and necessary that the occasion of the expense should be found in whatever is productive of the assessable income.
8.  Deductibility of transport expenses – general principles
9. Where the occasion of transport expenses can be found in the employee’s employment duties, the expenses will be incurred in gaining or producing the employee’s assessable income.
10. It has long been established that the term ‘incurred in gaining or producing assessable income’ is understood as meaning incurred ‘in the course of gaining or producing’ assessable income. Other ways that this has been expressed in the context of transport expenses, is that the employee is traveling ‘on work’, the travel is part of the employment the travel is an incident of the employment.
11. When the final Ruling is issued, it is proposed to apply both before and after its date of issue. However, the Ruling will not apply to taxpayers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of issue of the Ruling. To the extent that there is any conflict between the final Ruling and draft Ruling TR 2017/D6, the Commissioner would have regard to the earlier draft in deciding whether to apply compliance resources in income years to which the earlier draft applies.

For further details refer ATO

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