Are Moving Costs Tax Deductible?
Disclaimer: This is not financial advice. Please contact your accountant for the most up-to-date and correct taxation information or check the ATO website.
Can you claim relocation costs on tax? Can you deduct moving expenses?
You’re not eligible to deduct expenses related to removal or relocation. This remains true even if your move is a requirement of your employment, such as:
- being transferred in your current role
- starting a new position with a different employer.
Expenses for removal and relocation don’t sufficiently relate to the earning of your employment income or income-generating activities. These costs are incurred to commence earning from employment, making them private or domestic in nature.
Should your employer provide an allowance to offset some relocation costs, this allowance must be reported as assessable income on your tax return.
Whether you are moving to a new home for employment, study, or a change, expenses involved will quickly add up. While it is a relatively simple task for a single person with few belongings, the move becomes more complicated when taking the entire family and accumulated possessions into consideration. Savings associated with the move are important. The complex Australian tax system isn’t geared to assist with relocation. Often leaving people with less ready cash than they had hoped for. So, are moving costs tax deductible?
Costs involved in moving house
Planning your move from start to finish is the first step. This will help minimise costs, streamline the task, and save time. You will have to take all these into consideration. Distance of the move, amount of belongings to move, and connection/disconnection of services. At this point, you will know whether to choose a professional moving company or a do-it-yourself moving truck. Costs can range from $100 per day for hire of a small moving van, to several thousand dollars for a professional moving company to help you relocate interstate or overseas.
Relocating for employment reasons
There are numerous tax breaks available for employers and employees in the general course of their employment duties. With this in mind, many people expect their move to be tax deductible. Unfortunately, this is not usually the case.
In the modern work environment, it’s commonplace to attend an interview or undergo pre-employment training or tests at a location far from home. These circumstances, you are not entitled to a tax break, as your employment with the company hasn’t officially commenced.
Regarding to any case, it’s the employer rather than the employee who generally qualifies for the tax deduction, associated with moving house. Work related travel expenses are often tax deductible, but personal travel isn’t.
Moving interstate to work with the same company
If you have ongoing work with your employer, but are required to relocate interstate for work, you may be able to claim some tax deductions. For example, your employer might have an office in Sydney and another in Brisbane. If you are moving from Sydney to Brisbane, the journey to your new residence can be broken down into segments:
- Sydney home to Sydney branch office
- Sydney branch office to Brisbane branch office
- Brisbane branch office to new home
In this example, the first and third segments of the journey are not tax deductible. They consider them as regular travel to and from work and private residence (personal travel). The second segment of the journey, from Sydney branch office to Brisbane branch office entails a journey from workplace to workplace. This workplace related travel is tax deductible. Although this tax break doesn’t automatically cover the move of your household belongings, it will certainly help to offset moving costs.
In some circumstances the Australian Government will assist by shouldering some relocation costs. If you have been long-term unemployed or are disadvantaged in other ways, your Job Service Australia Provider may be able to help with relocation costs to another city. Concessions are also available for people relocating for study purposes. Although not directly related to house moving expenses, will also help to offset overall costs.
Tax breaks and concessions are often under-utilised in Australia. Partly due to the complex legal terminology, plus the degree of accountability or evidence required to make a claim. Australia is a huge country, and relocating for work or personal reasons is commonplace. There may soon come a time when governments realise it’s in the best interests of the overall economy to provide tax incentives for relocation. At present, moving and relocation costs are not tax deductible unless they are part of your work duty.
Finding tax deductions
Regardless of your reasons for relocation, there will be tax breaks available associated with your present or future occupation. It’s worth knowing just where you can save in setting up your new home and work environment.