ATO must confirm stance on travel claims when home is the place of work

With some businesses continuing to allow employees to work solely from home following the COVID-19 lockdowns, and others adopting more of a “hybrid” model, Tax & Super Australia (TSA) says the ATO needs to confirm what are legitimate travel expenses for those people who now have their home as their place of work.

TSA’s tax counsel John Jeffreys says the extension of flexible work arrangements can further complicate an already often misunderstood area of tax law. “Normally, expenses in relation to travel from home to a work location are not tax deductible.  However, changed working arrangements due to COVID-19 may have flipped this principle on its head.”

“When claiming travelling expenses, the taxpayer needs to confirm where their job is located” Mr Jeffreys said. “If someone now works predominantly from home and goes into their employer’s premises occasionally or sporadically, has the person’s home become their place of employment?”

“If this is the case, expenses of travel between that person’s home and an employer’s office could become tax deductible.  This could include ancillary costs, such as parking.” 

Mr Jeffreys added that there may be some instances where employment contracts need to be reviewed.  “For a deduction to be claimed for travel from home to an employer’s premises, the ATO will probably want to see that an employee’s employment contract specifically states that the employee is expected to work from their home but may be requested to attend the employer’s premises from time-to-time.”

In a situation where, say, an employee works three days at home and two days in the employer’s office on a regular basis, it could then be concluded that the employee has two work locations and raises the issue of whether travel expenses between those two locations are tax deductible.

The ATO will need to confront this issue sooner rather than later because many people have permanently changed the place at which they work. 

In a recent ATO communication, Assistant Commissioner Tim Loh noted that COVID-19 had changed work habits and work-related expenses would reflect this.  Yet he also added: “But if you are working at home, we would not expect to see claims for travelling between worksites…”

However, Mr Jeffreys said this may not be consistent with tax law if the home had become the employee’s place of work. “In the situation where someone had agreed with their employer that their home was their work location and not the employer’s premises, you would expect that person to be reasonably able to claim travel costs, such as train tickets, parking or petrol, on the occasions where they do travel to an office.”

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For further comment, please contact TSA tax counsel John Jeffreys:
Mobile: 0416 250 461

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