Taxation Travel Expense Deductibility

Question: Discuss about the Taxationfor Travel Expense Deductibility. Answer: The objective is to determine the deductibility of the travel costs for Jim who is a barrister and is engaged in income generating activities at two different locations. In accordance to Section 25.100, ITAA 1997 deduction for traveling expenses is available if the person concerned travels from one location to another if the following two conditions are satisfied (Barkoczy, 2015). When the taxpayer was present at the first location, he/she was engaged in commercial activities leading to assessable income. Also, when the taxpayer travels to the second location, then even at the second location, the taxpayer must be engaged in commercial activities leading to assessable income. It is noteworthy that if any of the places i.e. source or destination happens to be place of residence, then the travel expenses are not deductible (s. 25-100(3)). Additionally, travel expenses would not be considered deductible if at the time of travelling to the second place, the work or income producing activity at the first place has already finished (s. 25-100(4)) (Austlii, nd). Also, any travel expense which is of capital nature would not be deductible irrespective of the source and destination of the travel (s. 25-100(5)) (CCH, 2013). Scenario 1: As per the given scenario, Jim drives from his office located at the CBD to a court in Sydney suburb. In the given case, the deduction for travel expenses would not be available as Jim has finished his work at his work at the time of leaving for the court and afterwards returns home (s. 25-100(4)). No travel expense deduction is available for the travel between the court and home in accordance with s. 25-100(3). Scenario 2: As per the given scenario, Jim drives from the Sydney based office to Cooma farm and has not complete his work of the Sydney office yet and therefore is carrying a part of work to the farm also. It is apparent that Jim is travelling from one location where he is earning assessable income as a barrister to another place where he is deriving assessable income, Thus, in accordance with s.25-100(1), ITAA 1997, the travel expenses incurred would be deductible for tax purposes. Scenario 3: As per the given scenario, Jim travels from CBD based office to his residence. In accordance with s.25-100(3), ITAA 1997, the travel expenses incurred would not be deductible for tax purposes. It is also known that after coming home, Jim travels to the commercial establishment i.e. farm at Cooma. In accordance with s.25-100(3), ITAA 1997, the travel expenses incurred would not be deductible for tax purposes. Thus, in this scenario, as the source or destination of each of the trips is Jims residence, thus, the travel expenses incurred by Jim would not be deductible for the tax purpose. Reference Austlii (n.d.), Income Tax Assessment Act 1997 - SECT 25.100, Australian Legal Institute, [Online] Available at https://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s25.100.html [Accessed April 15, 2017] Barkoczy,S. (2015), Foundation of Taxation Law 2015, 7thed., North Ryde: CCH Publications CCH (2013), Australian Master Tax Guide 2013, 51st ed., Sydney: Wolters Kluwer