For an employee to deduct their costs of travel these expenses must be ‘occasioned’ by their earning of assessable income.
In simple terms, TR 2019/D7 discusses the deductibility of an employee’s costs of travel in the following scenarios:
- Ordinary travel between home and a regular place of work.
- Travel between home and alternative work location (i.e., a work location other than a regular place of work).
- Travel between home and a ‘transit point’.
- Travel between work locations (neither of which is the employee’s home).
For an employee to deduct their costs of travel, the ATO takes the view (in TR 2019/D7) that these expenses must be ‘occasioned’ by their earning of assessable income. In the context of employment income, the requisite nexus is established where there is a sufficiently close connection between the incurring of these expenses and the earning of such income, having regard to the employment contract and the substance of the employment arrangement.
Paragraph 11 of TR 2019/D7 identifies the following factors which may indicate that an employee has travelled in gaining or producing assessable income:
- Their travel occurs on work time.
- Their travel occurs when they are under the direction of their employer.
- Their travel fits within their duties of employment (e.g., under express terms of an employment contract, implied terms of employment or applicable common law principles).
- Their travel is relevant to the practical demands of carrying out their work duties.
- They have been asked by their employer to undertake the travel.
The articles focus on the application of TR 2019/D7 to the scenarios outlined in paragraphs (1) to (4) above. Importantly, the relevant principles, which will be discussed in future updates, represent the ATO’s current view on TR 2019/D7, and may be subject to change upon finalization of the draft ruling.