Tribunal: Deputy President Gary Humphries AO

The applicant was a Department of Defence (the Department) employee in the ACT. Between 2012 and 2015, the applicant was involved in a workplace dispute with a colleague that resulted in the deterioration of his mental health. The court considering the matter dismissed the charges finding the applicant was suffering from a mental illness. The court discharged the applicant to live with his uncle in Perth. The applicant claimed that the $8,598.82 it cost him to relocate to Perth was tax deductible because it was a work related expense.

The Commissioner of Taxation did not allow the deduction of the relocation expenses and disallowed the applicant’s objection to the decision. The applicant applied to the AAT for a review of this decision.

The applicant claimed the relocation expenses were work related because the court would not have made the order to move him to Perth if his mental health did not deteriorate and his employment with the Department caused the deterioration.

In general terms, expenses that are connected to an individual’s employment are tax deductible. Determining whether a certain expense is sufficiently connected to an individual’s employment can be a difficult task and that was the issue in this matter. The AAT explained that it was well established that not all expenses associated with employment would result in a tax deduction.

The AAT discussed the type of relationship required between expenses and employment to result in tax deductibility by referring to examples where the courts had considered circumstances similar to the case at hand.[1] The AAT concluded that the relationship between the relocation expenses and the applicant’s employment was not close enough to result in tax deductibility. In coming to this decision, the AAT discussed the character of the relocation expenses finding that they were loosely related to his actual role within the Department rather than a necessary expense that stemmed from that role.

The AAT affirmed the Commissioner of Taxation’s decision.

Read the full decision on AustLII.

 

[1] See the discussion in paragraphs 20 – 31 of the full decision.