A draft ruling has been issued (TR 2019/D7) that is yet to pass Parliament, which sets out when an employee can deduct transport expenses under section 8-1. This includes the cost of travel by airline, train, taxi, car, bus, boat or other vehicle.

It is generally the case 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 in travelling between work locations can be deductible.

The draft ruling explains a number of special cases or exceptions to the general rules, and also applies for the purposes of the Fringe Benefits Tax Assessment Act 1986 in determining whether such expenses paid by the employer would have been “otherwise deductible” if incurred by the employee.

Multiple locations
One such special case involves where the employee’s duties necessarily require them to work with some regularity for the same employer at two or more locations that are geographically distant from each other. Here, the 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.

“Unlike the ordinary case of home to work travel, in this situation travel to the more distant location may not be merely attributable to the employee’s choice of where to live, but may instead be a necessary consequence of the employment duties needing to be performed in more than one location,” the draft ruling says. “In other words, the distance or remoteness of a place of work may cause the need for the travel to be part of that for which the employee is employed.”

It concludes that the Commissioner will accept that travel to a secondary location of work which would typically require an overnight stay from home would be construed as a necessary incident of the employment and therefore the cost would be deductible.

Transit points
Sometimes the location where an employee reports for work will be different to where they carry out their substantive duties. The employee travels to a place (a transit point) from which further travel is needed to reach the place substantive duties are carried out.

As is generally the case, the cost of travel between home and where the employee reports for work (the transit point) is not deductible. However, according to the ruling, the cost of travel between the transit point and the place where they carry out their substantive duties will be deductible where it can be said that the employment is the occasion for the expense.

On call or standby
In some limited cases, travel that occurs while an employee is “on call” may be construed as part of employment, rather than a private matter even if it is between home and a regular place of work. Care is needed to distinguish between travel that is part of the employment, and travel that is merely necessary and a prerequisite to arriving at the workplace.

The ruling states that the fact that an employee is awaiting a call from their employer to attend a regular place of work does not in itself justify characterising travel to the regular place of work as deductible. “For an employee who is on call,” the ruling says, “the travel would usually be characterised as part of the employment if all of the following factors are present:

  • the employee’s duties can be construed as having substantively commenced at their home (or another private location) and the employee is required to travel to a regular place of work to complete those particular duties
  • undertaking the work in two locations is a necessary obligation arising from the nature of the duties
  • the travel to the workplace is not part of a normal journey to work that would have occurred anyway.”

The ruling is not yet law, but in preparation for it passing Parliament, a closer reading of TR 2019/D7 is recommended before preparing suitable clients for the expected tax outcomes generated by the above special circumstances. Note that it does not address:

  • the substantiation of transport expenses
  • transport expenses related to self-education or study (refer to TR 98/9)
  • the deductibility of parking fees
  • employees carrying out itinerant work (refer to TR 95/34)
  • fringe benefits tax generally, except for the application of the otherwise deductible rule.