Income tax : deductibility of travelling expenses of employee, spouse and family incurred by employer in relocating the employee.
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FOI status: May be released
This office has recently been asked to comment on the inter-relationship between the exemption from fringe benefits tax (FBT) on costs related to employee relocations and the operation of section 51AG of the Income Tax Assessment Act 1936.
2. The concern raised was that whilst an employer may be exempt from FBT on travel costs relating to a relocation, an income tax deduction for the travel costs associated with moving the employee's spouse and family to the new work location may be denied due to the operation of section 51AG.
3. Section 51AG applies to a situation where an employee
is travelling on duty (e.g., attending a conference) and the employee is
accompanied by his or her spouse or family. In general, if the employer
pays the travelling expenses of the spouse or family no income tax
deduction is allowable for such expenses.
4. By contrast, it is considered that an employee who is
travelling to commence employment duties at a new work location is not
travelling on duty. The employment duties do not commence until the
employee reports for work at the new location. If an employer pays the
travelling costs of getting the employee, his or her spouse and family
to the new work location such costs are allowable income tax deductions
to the employer. Section 51AG does not apply in these
5. This ruling has equal application in situations where
the employee is changing work locations but remains in the employ of the
same employer and situations where the employee relocates to take up
employment with a new employer.
COMMISSIONER OF TAXATION
16 November 1989
Date of effect:
EMPLOYEE - TRANSFER IN LOCALITY OF EMPLOYMENT