Deduction for Work-Related Vehicle Expenses Disallowed

In a decision of the Administrative Appeals Tribunal, a taxpayer, Mr Bell, was a denied a deduction for $21,565.73 of work-related vehicle expenses for the 2016 income year.

Mr Bell, was a construction worker who predominantly worked on a construction site in an eastern suburb of Melbourne and lived approximately 100 kilometres away from that worksite.

Mr Bell owned a ute that had a load carrying capacity of more than one tonne – so it fell outside the definition of a ‘car’ for the purposes of the ITAA 1997.

Mr Bell claimed a total deduction for $24,865.73 for motor vehicle expenses and received an allowance under his Enterprise Bargaining Agreement.

This allowance did not vary with the amount of travel undertaken and totalled $15,221 for the year.

Mr Bell contended that he was required to use his vehicle to transport heavy/bulky goods (tools) between his home and his workplace and to collect supplies and equipment from hardware stores while traveling between his workplace and his home.

Ordinarily, travel from home-to-work (and back again) is considered non-deductible. However, if an employee is required to carry heavy/bulky equipment for which there are no secure storage facilities at work, the travel between home and work with the heavy/bulky equipment can be considered deductible.

Unfortunately for Mr Bell, evidence before the Tribunal indicated that there were safe and secure storage facilities for his tools (the bulky/heavy equipment) at the worksite.

Accordingly, Mr Bell was unable to rely upon the ‘bulky goods’ exception to recharacterise home-to-work travel as being a deductible work expense.
Instead, it retained its ordinary private and non-deductible status.

Mr Bell was unsuccessful in advancing the argument that he was entitled to a deduction in relation to the motor vehicle expenses because he was in receipt of an allowance.

However, Mr Bell was able to convince the ATO that he had undertaken at least some work-related travel using his vehicle. The ATO allowed Mr Bell a deduction under the ‘cents per kilometre method’ up to the maximum dollar amount for 5,000 kilometres for the 2016 income year of $3,300.

Editor: This decision provides a timely reminder that simply carrying bulky equipment between home and work will not make these trips deductible, where there is a secure place for the equipment to be stored at the employee’s worksite. The decision also highlights the fallacy of assuming that being in receipt of an allowance somehow entitles the taxpayer to an offsetting deduction.

The taxpayer was technically ‘lucky’ that he was allowed the ‘cents per kilometre method’ deduction for work-related travel, given that his motor vehicle fell outside the definition of a ‘car’.

This is because the cents per kilometre method only applies to ‘cars’, so it could be said that the ATO was generous to the taxpayer in these circumstances.

Don’t get caught out like Bill. To make sure you can legally save the most on tax this year click to arrange for a FREE Tax Deductions Check session with our team.

Please Note: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.