Employees guide for work expenses

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Part E - Exceptions and relief from substantiation requirements

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 aren't 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 can't 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 work trip. She also buys lunch before the flight home. As her allowance covers only her dinner and breakfast, she can't rely on the exception from substantiation for her lunch expenses. To claim a deduction for the cost of 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 can't claim more than the reasonable amount unless you have receipts for all your overnight travel expenses.

See more:

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Record keeping exceptions for travel allowance expenses provides a link to the taxation ruling which provides the reasonable amounts for the current year

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 (for example, under a workplace agreement) isn't considered to be an allowance. If an allowance has been folded into normal salary or wages, the exception from substantiation doesn't apply.

Example – allowance folded into salary – substantiation exception doesn't apply

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

Malcolm can't rely on the exception from substantiation for his travel expenses, as he doesn't receive a separate allowance to cover his costs.

Malcolm can claim a deduction for the expenditure he incurs on accommodation, food and drink and incidentals when he is travelling overnight for work if he can substantiate these 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 don't 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 5 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 buys in Sydney, with the total cost for all his meals being $380.

Zoran isn't 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 can't claim a deduction for accommodation because his employer paid for it. Zoran must keep all receipts for any incidental work expenses he incurs when in Sydney. As he didn't receive an allowance for incidental expenses, he can't 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 don't need to substantiate the food, drink and incidental expenses you incur if they are up to the reasonable amounts.

You must keep records to substantiate your accommodation expenses. If you travel for more than 6 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 tax return.

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

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your allowance covers travel you undertake as a crew member of an aircraft

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the travel is principally outside Australia, and

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the total expenses you claim for the travel covered by the allowance doesn't 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:

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that you incurred an expense in the course of performing your work duties

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how you worked out your claim

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that you spent the money yourself and you weren't reimbursed

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that you declared the allowance as income on your tax return.

Substantiation requirements quick guide

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Keeping travel expense records

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 don't 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 tax 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:

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Overtime meal expenses to see if you are eligible to claim a deduction

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 expenses without providing written evidence. You need to be able to show how you have come up with the total of your claim.

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Laundry expenses

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Clothing expenses

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:

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there is sufficient evidence to indicate that you incurred the expense and it is deductible

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there is a reasonable expectation that you wouldn't have needed to substantiate the expense

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documents have been lost or destroyed despite your taking reasonable precautions.

See more:

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Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses

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Taxation Ruling TR 97/24 Income tax: relief from the effects of failing to substantiate

References