On 28 June 2017, the ATO released Draft Taxation Ruling (‘TR’) 2017/D6, which set out the Commissioner’s preliminary views on the general principles to be considered when determining the deductibility of an employee’s travel expenses under S.8-1 of the ITAA 1997. The draft ruling consolidated the views contained in various previous rulings (which were withdrawn at this time), and specifically focused on the deductibility of:
- transport expense (e.g., the costs of travel by airline, train, taxi, car, bus or other vehicle) incurred by an employee; and
- accommodation, meals and incidental expenses of an employee travelling on work.
The ATO subsequently announced that TR 2017/D6 would be split and reissued in two separate parts. That is, two new draft rulings would be issued, one of which would cover the deductibility of an employee’s transport expenses, with the other covering the deductibility of an employee’s accommodation, meals and incidental expenses.
The first of these new draft rulings, Draft TR 2019/D7, was released on 13 December 2019, providing guidance on the deductibility of employee transport expenses. This new draft ruling is the subject topic of the articles.
TR 2019/D7 also applies in an FBT context, in determining the application of the ‘otherwise deductible’ rule when an employer provides a transport-related fringe benefit to an employee. It does not, however, address the substantiation rules when claiming deductions for transport expenses, employees carrying out itinerant work who travel between home and a regular place of work or certain other matters listed in paragraph 4 TR 2019/D7.
To the extent the views expressed in TR 2019/D7 conflict with those of TR 2017/D6 (i.e., the ‘old draft ruling’), the ATO has advised that the principles of the new draft ruling should be followed as its represents its current view.
For completeness, note that the ATO has scheduled the release of a second draft ruling in 2020, which will provide additional guidance on the deductibility of an employee’s accommodation, meals and incidental expenses while travelling on work. Pending its release, the ATO will continue to accept that an employee who is away from home overnight for work for 21 days or less is generally travelling for work purposes rather than living away from home. Any accommodation, meals and incidental expenses incurred by such employees generally remain deductible, and any allowance received from an employer is typically treated as an assessable travel allowance.