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FBT – Employee transport costs – new ATO draft ruling!

The ATO has split the 2017 draft ruling on travel and accommodation expenses. It has issued a new draft ruling on travel costs and foreshadowed a separate ruling on accommodation.

In our August 2017 Newsletter and as part of TaxEd’s 2018 FBT Roadshow, we presented and outlined the ATO draft tax ruling TR 2017/D6: Income tax and fringe benefits tax: when are deductions allowed for employees’ travel expenses?

TR 2017/D6 was issued on 28 June 2017 and sets out the Commissioner’s preliminary views on the general principles for determining whether an employee can deduct travel expenses under s. 8-1 of the ITAA 1997. It discusses:

  • the general principles of deductibility of travel expenses under s. 8-1;
  • the application of the principles to the following four categories of transport expenses:
    • ordinary home to work travel;
    • special demands travel;
    • co-existing work locations travel; and
    • relocation travel;
  • the application of the principles to the following two categories of accommodation, meal and incidental expenses:
    • work-related accommodation; and
    • relocation or ‘living away from home’ accommodation.

TR 2017/D6 is now to be split into two rulings. On 13 December 2019, TR 2019/D7: Income tax: when are deductions allowed for employees’ transport expenses?  was issued.

TR 2019/D7 only covers transport costs, i.e. travel by airline, train, taxi, car, bus, boat or other vehicles.  The deductibility of accommodation, meals and incidental expenses, will be covered in a future draft ruling planned to be released later this year.

There are some differences in the new draft compared to TR 2017/D6. The main differences are:

  • Under the direction and control of the employer

This concept emanated from the John Holland decision involving fly-in-fly-out workers. The affected employees, under the terms of their employment, were required to work at remote locations in Western Australia. In order to report for work, employees were required to make their own way to Perth Airport, from where they were flown, at the taxpayers’ expense, to the work location. At the end of a work period, employees were flown back to Perth Airport, again at the taxpayers’ expense.

It was found in the course of the case that, under the relevant terms of their employment, from the time the employees checked in at Perth Airport they were travelling in the course of their employment, subject to the directions of John Holland and being paid for it. The original and new draft rulings note that one of the factors determining deductibility is whether the employee is under the direction and control of the employer

The new draft ruling provides further clarification of this concept, including paragraph 61 which states it should be considered in the overall context of the facts and circumstances of each case as direction and control alone is not sufficient to establish an employment nexus.

We refer you to examples 9 and 10. It would appear the terms and conditions of the relevant employment agreement will be critical in determining from when the employee is considered to be under the employer’s direction and control.

  • On-call and standby arrangements

This was not covered in TR 2017/D6.

TR 2019/D7 essentially replicates the guidance in Miscellaneous Taxation Ruling MT 2027.  The ruling confirms merely being on-call does not justify a deduction for transport costs

  • Transport of bulky equipment

This was also not covered by TR 2017/D6, and again mainly replicates the guidance in Miscellaneous Taxation Ruling MT 2027.

Regrettably, there is no real guidance on what is considered ‘bulky’ such as weight and dimension guidelines.  It also does not provide clarification surrounding what is considered ‘secure’, in terms of secure area.

This is an issue we receive many queries on from our emergency and protective services members.

  • Special demands travel

This concept is absent from the new ruling.

  • Two different offices

Example 8 in the new ruling can be contrasted with example 11 in TR 2017/D6.  Example 11 in the previous ruling provided broad guidance that where a person has two different work offices then travel to both offices is tax deductible.

However, example 8 in the new ruling notes that where the employee can work out of the second office at their discretion, then the transport is not tax deductible. It appears that the employee is required to attend both offices, in order for the transport to be tax deductible.

  • Remote working

Where the employee is working from home, any travel into the office is private home to work travel (due to the employee’s choice to work from home rather than in the office).

The draft ruling also provides a brief comment in relation to a home office being the sole base of operation, and that any travel to perform work duties such as to client premises would be considered tax deductible.

We are bemused as to why the ATO have decided to ‘split’ TR 2017/D6. We can only surmise that the original draft ruling was too complicated to read in one ‘hit’, so to speak.

Importantly for our members,  it is our understanding that, pending the issue of a further draft ruling on the deductibility of meals and accommodation, the ATO will continue to accept that where an employee is away from home overnight for work for 21 days or less, the employee will be treated as travelling for work purposes rather than living away from home and the allowance paid by the employer will be treated as a travel allowance.

We encourage you to read the new draft ruling and, should you have any specific concerns, reach out to the ATO contact officer (either directly or through us).

The ATO contact officer’s details are:

Kim Hall, Individuals and Intermediaries

Phone: (07) 3149 5412

Relevant subscribers are also welcome to seek clarification on the effect of the ruling through our question and answer service.


This article provides a general summary of the subject covered and cannot be relied upon in relation to any specific instance. It is not intended to be, nor should it be relied upon as, a substitute for professional advice. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use.