Employees guide for work expenses

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Part E - Exceptions and relief from substantiation

Table of contents

Exceptions for overnight travel

Substantiating overtime meals

Substantiating laundry expenses

Total work-related expenses $300 or less

Relief from substantiation

There are some exceptions from the substantiation requirements for work-related expenses. However, it is important to keep a record of how you calculated your claim even if you are not required to keep written evidence of the actual expenses. You can only claim the expenses you actually incurred.

Exceptions for overnight travel

When you receive an allowance to cover your overnight travel expenses, you may not have to obtain or keep receipts and a travel diary (see Substantiation requirements - quick guide for when that will be the case). You can still only claim expenses you actually incurred.

The exception applies only to substantiating expenses that your allowance covers. For example, if you are paid an allowance for food and drink, you cannot rely on the exception for your accommodation or incidental expenses, and you need to substantiate them.

Example - meal allowances

Kim is paid an allowance for dinner and breakfast during an overnight trip. She also buys lunch before the flight home. As her allowance covers only her dinner and breakfast, she cannot rely on the exception from substantiation for her lunch expenses. To claim a deduction for her lunch, Kim would be required to substantiate its full cost.

Exceptions for substantiation: reasonable amounts

Each year, the ATO publishes reasonable amounts for the exceptions to substantiation for travel expenses. These reasonable amounts are only used to work out the exceptions for substantiation: you cannot claim more than the reasonable amount unless you have receipts for all your overnight travel expenses.

See more:

General travel allowances

For the exception to apply, your allowance must be paid for a specific work journey. It can't be a fixed amount that you receive regardless of how much you travel. In addition, the allowance must be an amount that could be reasonably expected to cover your expenses, and not merely a token amount.

An amount for travel expenses folded into your normal salary or wages - under a workplace agreement, for example - is not considered to be an allowance. If an allowance has been folded into normal salary or wages, the exception from substantiation does not apply.

Example - allowance folded into salary - substantiation exception does not apply

Malcolm works as a travelling sales representative for a telecommunications company. His employer realises that he travels a lot, so has increased his base salary to account for travel he does.

Malcolm cannot rely on the exception from substantiation for his travel expenses, as he does not receive a separate allowance to cover his costs.

Malcom can claim a deduction for the expenditure he incurs on accommodation, food and drink and incidentals when he is travelling overnight for work and he must substantiate all his expenses.

Domestic exception

If you receive an allowance from your employer for travel for specific journeys within Australia, and the expenses you incur and therefore claim are up to the reasonable amount, you do not need to keep a travel diary or receipts for food and drink, accommodation or incidental expenses. However, you still need to be able to show how you calculate your claim.

You can only claim a deduction if the allowance is shown on your income statement and you have declared the allowance in your return.

Example - substantiation for domestic travel

Zoran works in Melbourne. His employer requires him to travel to the office in Sydney for a work week. Zoran is paid a $120 meal allowance per day to cover his breakfast, lunch and dinner expenses for the five days he is required to be in Sydney.

Zoran's employer pays for the accommodation directly. Zoran spends less than the reasonable amount set by the Commissioner for each of the meals that he purchased while in Sydney and the total for his meals came to $380.

Zoran is not required to keep receipts for his expenses on food and drink for this trip to Sydney as the domestic substantiation exception applies.

If the ATO asks, Zoran still has to demonstrate that he was travelling for work, that he has credit card statements or other records to show he spent the amount of $380 during the work trip, and that he declared the $600 allowance in his tax return.

Zoran cannot claim a deduction for accommodation because his employer paid for it directly. Zoran must keep all receipts for any incidental work expenses he incurs when in Sydney. As he did not receive an allowance for incidental expenses, he cannot rely on a substantiation exception for those.

International exception

If you travel internationally for work and receive a travel allowance from your employer for that specific journey, you do not need to substantiate the food, drink and incidental expenses you incur if they are up to the reasonable amounts.

You still need to keep records to substantiate your accommodation expenses. If you travel for more than six nights, you also need to keep a travel diary.

You can only claim a deduction if the allowance is shown on your income statement and you have declared the allowance in your return.

If you are an aircrew member working on international flights, you don't need to keep a travel diary if:

  • your allowance covers travel you undertake as a crew member of an aircraft
  • the travel is principally outside Australia, and
  • the total expenses you claim for the travel covered by the allowance does not exceed the allowance you receive.

Documentation

If you are claiming less than the reasonable amounts and you are relying on the exception from getting and keeping substantiation you must still be able to show:

  • that you incurred an expense in the course of performing your work duties
  • how you worked out your claim
  • that you spent the money yourself and you weren't reimbursed
  • that you declared the allowance as income on your tax return.

Substantiation requirements quick guide

Table 1: No travel allowance received

Nights travelled

Domestic travel

Overseas travel

Written evidence

Travel diary

Written evidence

Travel diary

Less than 6 nights in a row

Yes

No

Yes

No

6 or more nights in a row

Yes

Yes

Yes

Yes

Table 2: Travel allowance received

Claim exceeds the reasonable allowance amount:

Nights travelled

Domestic travel

Overseas travel

Written evidence

Travel diary

Written evidence

Travel diary

Less than 6 nights in a row

Yes

No

Yes

No

6 or more nights in a row

Yes

Yes

Yes

Yes

Exception for international air crew: no substantiation required when the claim is less than the allowance



Claim does not exceed the reasonable allowance amount:

Nights travelled

Domestic travel

Overseas travel

Written evidence

Travel diary

Written evidence

Travel diary

Less than 6 nights in a row

No

No

Accommodation

- Yes

Food, drink and incidentals - No

No

6 or more nights in a row

No

No

Accommodation

- Yes

Food, drink and incidentals - No

Yes

Exception for international air crew: no substantiation required when the claim is less than the allowance

See more:

Substantiating overtime meals

If you receive an overtime meal allowance under an award or enterprise agreement, you may not be required to keep written evidence of your expenses. If the expenses you intend to claim for your overtime meals are no more than the reasonable amount, you do not need to keep written records.

However, you can only claim a deduction for the amount you have actually spent on food and drink that was consumed during the overtime. You can only claim a deduction if the allowance is shown on your income statement and you have declared the allowance in your return.

If you claim more than the reasonable amount, you need to keep written evidence for the whole amount, not just the excess.

See more:

Substantiating laundry expenses

If laundry expenses for your deductible work-related clothing are $150 or less, you can claim the amount you incur on laundry without providing written evidence. You need to be able to show how you have come up with the total of your claim.

See more:

Total work-related expenses $300 or less

If the total of your work expenses is $300 or less (including laundry expenses but excluding car, travel and overtime meal allowance expenses) you can claim the amount expended without keeping records. You can only claim the amount you spend and you need to show how you have come up with the total of your claim.

Relief from substantiation

If you fail to provide substantiation, the Commissioner may grant you relief from substantiation in some limited circumstances. This may occur where:

  • there is sufficient evidence to indicate that you incurred the expense and it is deductible
  • there is a reasonable expectation that you would not have needed to substantiate the expense
  • documents have been lost or destroyed despite your taking reasonable precautions.

See more:

  • Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses
  • Taxation Ruling TR 97/24 Income tax: relief from the effects of failing to substantiate

Amendment history

 

Part

Detail

August 2020

Throughout

Minor wording changes to improve clarity.

ATO references:
NO Employees guide for work expenses

Employees guide for work expenses
  Date: Version:
  1 July 2018 Original document
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