Bonafide ‘mobile’ work can open up more deductions
Digital capabilities, a growing “gig economy” and the changing nature of employment means that many Australians are becoming more mobile in their income-earning activities, or in some circumstances practically nomadic chasing work.
With the ATO on the lookout for “red flags” for taxpayers making false work travel claims, it’s worth looking at the ATO’s definition of itinerant workers and how this can lead to accessing certain tax deductions.
As well as some vehicle-related costs, genuine work-related travel claims can include meals and accommodation. But the group of workers who are typically eligible to correctly make such claims can be labelled as “itinerant”, which is the term the ATO uses.
Broadly, the definition of “itinerant” refers to shifting places of work. While itinerant work is generally held to be undertaken by certain trades or classifications of workers, such as those working in primary production or mining, “itinerancy” can apply to any individual worker subject to their employment satisfying certain characteristics and criteria. But it’s important to get it right.
The characteristics or indicators of itinerant work are that:
- travel is a fundamental part of the employee’s work
- the existence of a “web” of workplaces in the employee’s regular employment (that is, the employee has no fixed place of work)
- the employee continually travels from one work site to another. An employee must regularly work at more than one worksite before returning to his or her usual place of residence
- other factors that may indicate itinerancy (to a lesser degree) include:
- the employee has a degree of uncertainty of location in his or her employment (that is, no long term plan and no regular pattern exists)
- the employee has to carry bulky equipment from home to different work sites
- the employer provides an allowance in recognition of the employee’s need to travel continually between different work sites.
The ATO has stated that the above characteristics, while not exhaustive, do give some guideline for determining itinerancy. However it says that no single factor should be relied upon, and that individual circumstances and the nature of work duties can also be factors in any final determination.
The tax legislation does not provide a definition of the term itinerant. Therefore the ATO approach in labelling employment as being itinerant in nature, and eligible for certain travel expense deductions, is not arrived at by a prescriptive approach, but rather through the use of concocted case studies.
The following examples can be helpful in determining if the above characteristics or indicators have been met, and if therefore you have a “reasonably arguable” position in regard to claiming certain travel expenses.
Travelling is a fundamental part of the job
Travel must be a central feature of the employee’s duties, and the very nature of the work means that it must be carried out in different locations.
Web of workplaces
If part of the employee’s work requires them to perform work at a single site and then move to other sites on a regular basis, it would be considered that a “web” of workplaces exists.
Continual travel from one site to another
Continuously travelling from one workplace to another is a key factor in order to deem work as itinerant. However there needs to be a substantial link with the job to continuously travel for work.
Continual travel refers to the amount of times an employee changes work locations. It requires an employee to work at more than one work site in order to be deemed to travel continuously. If an employee stays at a particular work site for a short period spanning several days or few weeks they may still be regarded as engaged in itinerant employment provided their usual pattern of work involves continual travel to more than one worksite before returning to their usual place of residence.
Uncertainty of location
One of the key elements for being classified as an itinerant worker is travelling to different workplaces, but the element of uncertainty of location is generally another distinct characteristic of itinerant employment. This only relates to uncertainty in terms of location and not the availability of employment.
Carry heavy equipment
A deduction may be allowable if the costs can be attributed to transporting bulky equipment, rather than merely travelling from one work site to another. If the equipment is transported to and from work by the employee as a matter of convenience or personal choice, it is considered that the transport costs are private and no deduction is allowable.
Provision of allowance
A payment of an allowance for travel by an employer does not of itself indicate whether the work performed is of an itinerant nature or not. Such “official” recognition from an employer may indicate that travel is a necessary element of work, however it is also the case that a particular employer may pay an allowance irrespective of whether the employee is required to use it in travelling. This factor would need to be considered with other characteristics of the employee’s work, as mentioned above.