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The ATO released draft ruling TR 2019/D7 on 13 December 2019 addressing its views on the deductibility of employee transport expenses across a range of flexible work arrangements that are found to be commonplace in most workplaces.
Notable inclusions are:
- ATO views on a range of modern-day travel expenses incurred by an employee.
- Increased guidance on deductibility of travel expenses, in particular ‘on-call’, ‘standby’ and ‘fly in fly out’ arrangements.
To assist in the application of the ruling here are different examples illustrating the deductibility of travel expenses between home and work locations.
Scenario A Travel 
Regular v Alternate work location
An employee travels to multiple locations around Australia and it is a compulsory requirement of the role within the company. In such situations, the travel expenses from home to the regular work location would not be deductible. However, the travel expenses from home to alternate work locations would be deductible.
Jim works for a tourism company and lives with his family in Perth. While Jim is based at the company’s head office in Perth, the company has offices in various locations across WA including Bunbury and another significant office in Adelaide. Due to the requirements of his role, Jim travels to Adelaide regularly.
Jim carries out employment duties at both the Perth and Adelaide offices. The travel is relevant to the practical demands of carrying out his work duties and is undertaken at the request of his employer. Accordingly, the cost of travelling from Jim's home to the Adelaide office is deductible.
However, the portion of travel from home to his regular work location (Perth) is not deductible.
Jim occasionally works out of the office in Bunbury when he goes there to visit family. As this travel is at Jim’s discretion, his travel expenses from his home to Bunbury are not deductible as it is not a compulsory requirement of his role to work out of the Bunbury office.
Key factors to look for in such arrangements are as follows:
- An employee is under the direction and control of their employer
- An employer generally asks for the travel to be undertaken
- Travel fits within the duties of the employment
- The travel is relevant to the practical demands of carrying out the employee’s work duties.
Scenario B Travel
Fly in Fly Out Arrangements 
In certain cases, an employee may need to report to work at a particular location (transit point) from which they need to travel to another location to carry out their substantive duties. This is usually typical of fly in fly out arrangements.
The place and time where the employee is subject to the employers direction and control and whether the workplace policies apply is ‘key’ in such scenarios.
Amy lives in Adelaide and works for a mining company based in Perth. Her contract requires her to work in a mine in Port Hedland.
As part of her travel requirements, Amy travels from home to Adelaide Airport and takes a flight to Perth Airport from which she boards a flight to Port Hedland. From the time Amy arrives at Perth Airport, she is under the employer’s direction and control and subject to the application of workplace policies.
In this case, the portion of travel from Perth Airport to Port Hedland is deductible to Amy.
However, the travel expenses from home to Adelaide Airport and the subsequent flight to Perth Airport are not deductible.
In this example, let us change a few facts:
- Amy does not report to Perth Airport and can report and start work at Port Hedland directly from any airport that is convenient to her.
- Amy is subject to the employer’s direction and control and workplace policies from the time she arrives and departs Port Hedland (work site) and not before.
In this case, the ATO consider that the travel expenses from Amy’s preferred airport to Port Hedland are not deductible as Amy is not travelling in respect of work and is not at the direction of her employer until she arrives at the work site.
Scenario C Travel 
‘On-call’, ‘Standby’ and ‘Flexible Work Arrangements’
There are situations where an employee undertakes some work duties at home for their convenience. This is an emerging trend and is enabled by advancements in technology that support such flexible work arrangements.
Mary works as a computer technician and as she has a young child, her employer allows her to work from home rather than in the office. Mary has a home office that she uses exclusively for work. Mary works from home for mere convenience so that she can look after her child and work flexible hours.
Mary's travel from home to her regular place of work at the office is a consequence of her choice to work from home rather than in the office. In this case, Mary is not entitled to claim a deduction for her travel expenses as it is deemed private or domestic in nature and is not explained by the employment duties. The ATO’s view is that the treatment does not change event if the travel occurs during work hours.
However, if Mary is called to correct a fault after hours and she commences work on the fault at home and travels to her office because she cannot rectify it at home, the cost of travel between her home and the office under these circumstances is deductible.
What about FBT?
It is worthwhile for employers to review their existing arrangements with employees who perform their duties under the abovementioned circumstances, particularly on the application of FBT.
If the employer pays for the travel expenses, and the expenses are considered ‘otherwise deductible’ under the FBT legislation, then FBT will not apply.
FBT may be applicable depending on the facts and circumstances of the case.
In summary:
The ruling is still in draft and the final ruling is proposed to apply both before and after it’s issue date. Submissions on the ruling are due to the ATO by 28 February 2020.
It’s important to remember that the application of the ruling is subject to individual arrangements and circumstances. For more information on how this may impact you, please contact your local RSM adviser.
