Since the advent of the COVID-19 pandemic, the number of doctors taking up locum shifts, including at COVID clinics, has increased. Many doctors are travelling from regular salaried positions at hospitals to other work that they can pick up either as an employee or under their ABN as a sole trader. Some doctors are taking a year or more to work solely under their ABN or as employees at multiple hospital sites.
There have recently been some changes to ATO Rulings as well as new case law which sets out what travel deductions can be claimed. Let’s take a look:
Tax Ruling 2021/1 – Transport Expenses
This ruling clarifies several points around the type of travel deductions that can be made by employees:
- The travel is part of employment duties (required by your employer) and not because of your personal circumstances (where you live);
- To expand on this, quite simply, getting to and from your regular place of work is not-deductible, regardless of how far this may be.
- Travel costs are a necessary consequence of your work;
- The employer demands the employee undertakes the travel; and
- The travel is undertaken during work hours.
Example six in the Ruling states that travel to a second workplace can be deductible. However, this would be very rare for a medical professional, they would need to be employed by a health service that has multiple sites, far apart from each other. If you are travelling to work for a different employer, you will not access a deduction as you are simply travelling from home to work. The exception to this would be if you went directly from workplace to workplace, not to accommodation to start work the next day.
One specific exception to this rule is when you are on-call. If you start giving advice from home whilst on-call, but then need to travel in to see the patient, this travel will be deductible.
Mfula vs the Federal Commissioner of Taxation
This recent case looked at travel deductions claimed by a medical practitioner in the 2016 financial year. Dr Mfula was both a salaried employee and a locum doctor/surgical assistant, billing hospitals under his ABN.
Whilst working as a locum via the Global Medics agency in Wagga Wagga, the taxpayer travelled by car from his home in Melbourne and flew to other sights in NSW. He sought to claim car travel and food/incidental costs in the tens of thousands, whilst accommodation and flights were covered by the hospitals.
The Medical Workforce Unit at one of the Local Health Districts the taxpayer engaged with noted that no allowances were paid to him. Furthermore, he was not required to use his vehicle for work purposes, and that he was required to pay for his own meals.
Dr Mfula was unable to claim any motor vehicle kilometres except for some work as a surgical assistant for which he worked at multiple sites on the same day. All other car travel was deemed to be home to work and not ‘on work’ or at the direction of an employer.
Meal costs – despite arguing that a meal allowance was rolled into his hourly rate – were also disallowed. Dr Mfula did not have receipts and was relying on bank transactions as well as the ATO reasonable meal limit under what is now TR 2021/D1. Paragraphs 18 and 19 of this Ruling outline two examples:
- An employee required by their employer to stay away from their usual residence overnight for relatively short periods of time. In this case the taxpayer may deduct meal costs under the ATO’s reasonable expense method or via receipts. The former method still needs to meet Sec.900-115 Income Tax Assessment Act 1997 being written evidence.
- An employee choosing to work far from their usual residence and incurring meal costs would have those costs disallowed as a tax deduction. This is because the meal costs are ‘private and domestic in nature.’
The reasonable amounts published by the ATO are only relevant for determining whether the substantiation exceptions apply. They are not an automatic deduction.
In all, this is not great news for travelling doctors. Car, accommodation and meal costs will generally not be deductible, unless you can meet specific criteria and maintain good records.
Remember too that receipts can fade, just as they did for Dr Mfula. Take photos and keep them safe in secure cloud storage, setup folders for specific trips, rotations and financial years. When the ATO comes knocking in the event of an audit, you will need them!
You can reach out to your expert tax adviser at DPM for more information on the above at any time by calling 1800 376 376 or request a free initial consultation.