Taxation Ruling

TR 98/10

Income tax: reasonable allowances amounts for the 1998-99 income year

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FOI status:

May be releasedFOI number: I 1017596

contents para
What this Ruling is about
Class of person/arrangement
Date of effect
Previous Rulings
Definitions
Ruling
Explanations
Examples
SCHEDULE 1
Detailed contents list

Preamble

The number, subject heading, paragraphs 1 to 3 of the Class of person/arrangement section and the Date of effect and Ruling parts of this document are a 'public ruling' for the purposes of Part IVAAA of the Taxation Administration Act 1953 and are legally binding on the Commissioner. Taxation Rulings TR 92/1 and TR 97/16 together explain when a Ruling is a public ruling and how it is binding on the Commissioner.

What this Ruling is about

Class of person/arrangement

1. This Ruling sets out the amounts which the Commissioner of Taxation considers are reasonable for the 1998-99 year of income in relation to claims made for:

(a)
overtime meal allowance expenses ;
(b)
domestic travel allowance expenses ;
(c)
travel allowance expenses for employee truck drivers; and
(d)
overseas travel allowance expenses ;

which are work-related losses or outgoings incurred and are covered by award overtime meal allowances, domestic travel allowances and overseas travel allowances.

2. Subdivision 900-B of the Income Tax Assessment Act 1997 ('ITAA 1997') provides that the substantiation requirement to obtain written evidence does not apply to claims by employee taxpayers for expenses covered by:

(a)
an overtime meal allowance paid under an industrial instrument; or
(b)
a domestic travel allowance or overseas travel allowance, whether or not the allowance is paid under an industrial instrument;

if the amount of the claim for losses or outgoings incurred does not exceed the amount that the Commissioner considers reasonable (see paragraphs 18 to 38). This Ruling discusses the exceptions from substantiation which are available for travel allowance and award overtime meal allowance expenses .

3. The deductibility of losses and outgoings incurred is not discussed in detail in this Ruling. However, it remains a requirement of the law that before the exception from substantiation can apply in respect to claims for the losses or outgoings incurred, the losses or outgoings must be deductible under some provision of the Act .

4. This Ruling has application to employers for determining whether or not tax instalments which are required to be deducted from award overtime meal allowances or travel allowances, can be varied where special circumstances exist. That is, where it is reasonable to expect that:

·
expenses up to at least the amount of the allowance will be incurred by the employee ;
·
the expenses will be incurred for the purpose for which the allowance is paid; and
·
the expenses will be tax deductible

(see Taxation Ruling IT 2583, paragraph 3).

5. Some of the key terms used in this Ruling (and indicated by the use of bold italic text) are defined in paragraph 8 below.

Date of effect

6. This Ruling applies to deductions claimed for work-related losses and outgoings incurred during the 1998-99 income year which are covered by a travel allowance or award overtime meal allowance.

Previous Rulings

7. This Ruling updates the Reasonable Allowance Amounts previously advised in Taxation Rulings TR 97/14, TR 96/21, TR 95/26, TR 94/23 and TR 93/22.

Definitions

8.

employee
·
Section 900-12 of the ITAA 1997 states that the substantiation rules apply to Pay As You Earn (PAYE) earners and the entities that pay them. A PAYE earner means an employee as defined by section 221A of the Income Tax Assessment Act 1936 ('ITAA 1936'). When the word ' employee ' is used in this Ruling it means a PAYE earner.
Expense
·
Before the changes made by the Tax Law Improvement (Substantiation) Act 1995, the substantiation provisions defined an expense as including a loss or outgoing. This extended meaning of expenses is now carried into the substantiation rules contained in Division 900 of the ITAA 1997. When the word 'expense' is used in this Ruling it means a loss or outgoing.
Sleep away from home
·
We consider the term 'travel away from the employee's ordinary residence' means for most employees that the travel involves an overnight stay, that is, the acquisition of accommodation or the occasion of an outgoing on accommodation, e.g., sleeps in a motel/hotel or, for a truck driver, sleeps in their truck. Some employees may work at night and sleep during the day; therefore, the plain English term ' sleep away from home ' is used in this Ruling.
Travel record
·
A Travel record is a record of activities undertaken during the travel (subdivision 900-F of the ITAA 1997). It is not a record of expenses incurred during the travel. A Travel record can be a diary or similar document which specifies the activities as required in section 900-150 of the ITAA 1997. The purpose of Travel records is to show which activities were undertaken in the course of producing assessable income, so that expenses or portions of those expenses can be attributed to those income-earning activities.
The Act or this Act
·
Any reference in this Ruling to the Act or this Act refers to the ITAA 1936 and/or the ITAA 1997 as appropriate.

Ruling

Substantiation

9. Before considering the application of the substantiation provisions to a travel allowance expense or an award overtime meal allowance expense, it is a pre-requisite that the expense is deductible under another provision of the ITAA 1997 (subsection 900-15(1)).

10. An expense must actually be incurred before a claim can be made. A taxpayer cannot automatically claim a deduction just because they receive an allowance. If an expense is incurred partly for work purposes and partly for private purposes, only the work-related portion is an allowable deduction.

11. Under subdivision 900-B of the ITAA 97, a deduction is not allowable for a work expense, including a meal allowance expense or travel allowance expense, unless the expense qualifies as a deduction under a provision of this Act and written evidence of the expense has been obtained and retained by the employee taxpayer.

12. If a deduction is claimed for an expense covered by an allowance, the total allowance received must be shown as assessable income in the employee's tax return. If the amount incurred is less than the amount of the allowance received, the allowance must still be shown as assessable income and a deduction can be claimed for deductible expenses incurred. Paragraphs 41 to 45 in the Explanations part of this Ruling contain further information.

Substantiation exception

13. The objective of the substantiation exception provisions contained in subdivision 900-B of the ITAA 1997 is to relieve taxpayers covered by the exception from the requirement to substantiate claims for deductible expenses by using detailed calculations, records or receipts. If a claim covered by a travel allowance or award overtime meal allowance qualifies for exception from substantiation, it is not necessary to keep written evidence as required under subdivision 900-E of the ITAA 1997.

14. A taxpayer can choose not to use the exception from substantiation. Each taxpayer can decide between maintaining fewer records and claiming the reasonable amount, which in some circumstances may be lower than the amount actually incurred, or keeping written evidence and claiming the full amount of deductible expenses incurred, which may be higher than the reasonable amount.

15. If a taxpayer relies on the exception from substantiation, they may still be required to show the basis for determining the amount of their claim and that the expense was actually incurred for work-related purposes. What is a reasonable basis for determining the amount of a claim which is subject to an exception from substantiation varies according to individual circumstances and the nature of the expense.

16. If necessary, it is acceptable for a reasonable estimate to be the basis for claims having regard to the taxpayer's occupation and the types of expenses that would be expected to be incurred. Paragraphs 48 to 66 in the Explanations section of this Ruling contain further information.

Award overtime meal allowance expense exception

17. For overtime meal expenses to be considered under the exception from substantiation, the award overtime meal allowance must be paid to cover the cost of food or drink in connection with overtime worked. The overtime meal allowance must be paid or payable under a law of the Commonwealth or of a State or Territory, or an award, order, determination or industrial agreement in force under such a law (section 900-60 of the ITAA 1997).

Reasonable overtime meal allowance expense claims

18. Overtime meal allowance expense claims up to an amount of $15 per meal are considered to be reasonable for the 1998-99 income year where the overtime meal allowance is paid under an industrial instrument. If a deduction claimed is more than the reasonable amount, the whole claim must be substantiated with written evidence, not just the excess over the reasonable amount.

Travel allowance expense exception

19. For domestic or overseas travel allowance expenses to be considered for exception from substantiation, the employee must be paid a bona fide travel allowance to cover specific travel. The allowance must be paid to cover work-related travel expenses incurred for travel away from the employee's ordinary residence, undertaken in the course of performing duties as an employee (subsection 900-30(3) of the ITAA 1997).

20. Further, the travel allowance must be paid or payable to cover expenses for accommodation or food or drink or expenses incidental to the travel. A travel allowance that is not paid or payable to cover specific work-related travel is not considered a travel allowance for the purposes of the exception from substantiation. The exceptions do not apply to accommodation expenses for overseas travel. Paragraphs 54 to 64 in the Explanations part of this Ruling contain further information.

Reasonable domestic and overseas travel allowance expense claims

21. A domestic or overseas travel allowance expense claim is considered to be reasonable if the amount of the claim covered by the allowance received by an employee , does not exceed the rate set for members of the Australian Public Service (APS). Special rates apply to employees with annual salaries above $122,136 and to office holders covered by the Remuneration Tribunal (paragraph 29 and 30). See paragraph 33 for amounts that apply to employee truck drivers.

22. As the APS rates are updated at various times during the year, the amount that is considered reasonable is either the APS rate applicable at the time of travel or the rate given in this Ruling. Similarly, Remuneration Tribunal rates applicable at the time of travel also apply. The amount is considered reasonable provided the amount of the claim is incurred for deductible travel as per paragraphs 9 and 12.

23. The rates set for accommodation for the APS or by the Remuneration Tribunal represent amounts that could reasonably be expected to be incurred at commercial establishments such as hotels, motels and serviced apartments. The rates for accommodation are only considered reasonable amounts to claim if the expense is incurred for accommodation at these types of establishments, subject to paragraph 30 (see also paragraphs 78 and 79).

Reasonable domestic travel allowance amounts

Daily travel allowance expense claims

24. A claim for travel expenses by an employee in receipt of a daily travel allowance (i.e., where an employee sleeps away from home) is considered reasonable if it does not exceed the rates for the 1998-99 income year of daily travel allowances set for members of the APS. If a deduction is claimed for more than the reasonable amount, the whole claim must be substantiated with written evidence, not just the excess over the reasonable amount.

25. Subsection 900-50(2) of the ITAA 1997 requires that in determining what is reasonable, the Commissioner must consider what it would be reasonable for the employee to incur for the travel. In determining the reasonable amount to claim for meals, reference should be made to the period of the travel. That is, what meals (e.g., for breakfast, lunch and dinner) would it be reasonable for that employee to incur during the period from the commencement to the end of the travel, given the individual employment circumstances of the employee .

Reasonable daily travel allowance amounts

26. APS daily travel allowances are payable according to salary levels and destination and are as follows for the 1998-99 income year (as at 14 May 1998):

(i) employee's annual salary range of $68,228 to $122,136
Place Accomm.
$
Food and drink
$
Bfast Lunch Dinner
14.15 19.20 28.65
Incidentals
$
Total
$
Adelaide 112 62.00 17.00 191.00
Brisbane 127 62.00 17.00 206.00
Canberra 96 62.00 17.00 175.00
Darwin 113 62.00 17.00 192.00
Hobart 87 62.00 17.00 166.00
Melbourne 147 62.00 17.00 226.00
Perth 116 62.00 17.00 195.00
Sydney 155 62.00 17.00 234.00
High cost country centres see note (a) below 62.00 17.00 see note (a) below
Tier 2 country centres (see note (b) below) 72 Bfast Lunch Dinner
11.25 12.25 25.70 49.20
17.00 138.20
Other country centres 61 49.20 17.00 127.20
(ii) employee's annual salary is below $68,228
Place Accomm.
$
Food and drink
$
Bfast Lunch Dinner
13.05 13.90 25.30
Incidentals
$
Total
$
Adelaide 84 52.25 11.95 148.20
Brisbane 95 52.25 11.95 159.20
Canberra 72 52.25 11.95 136.20
Darwin 85 52.25 11.95 149.20
Hobart 65 52.25 11.95 129.20
Melbourne 110 52.25 11.95 174.20
Perth 87 52.25 11.95 151.20
Sydney 116 52.25 11.95 180.20
High cost country centres see note (a) below 52.25 11.95 see note (a) below
Tier 2 country centres (see note (b) below) 60 Bfast Lunch Dinner
10.00 12.25 22.75 45.00
11.95 116.95
Other country centres 51 45.00 11.95 107.95

Notes:
(a)
Accommodation expenses for high cost country centres are listed in paragraph 27 of this Ruling.
(b)
Tier 2 country centres are listed in paragraph 28 of this Ruling.

27. High cost country centres - accommodation expenses :

Country centre $ Country centre $
Broome 106.00 Launceston 66.00
Burnie 72.00 Maria 69.00
Cairns 77.50 Newcastle 95.00
Christmas Island 101.50 Newman 99.50
Dampier 77.50 Nhulunbuy 96.00
Devonport 69.00 Norfolk Island 103.00
Exmouth 104.00 Paraburdoo 74.00
Gold Coast 75.50 Pt Headland 106.00
Halls Creek 74.00 Thursday Island 90.50
Jabiru 168.00 Tom Price 84.50
Kalgoorlie 80.00 Weipa 90.00
Katherine 67.00 Wilpena 93.00
Karratha 103.50 Wollongong 71.50
Kununurra 97.50 Yulara 257.50

28. Tier 2 country centres:

Country centre Country centre
Alice Springs Griffith
Ballarat Horsham
Bright Leeton
Broken Hill Maitland
Castlemaine Northam
Carnarvon Orange
Colac Portland
Derby Port Lincoln
Emerald Port Pirie
Gosford Wagga Wagga

employees with annual salaries above $122,136 or office holders covered by the Remuneration Tribunal

29. Daily domestic travel allowance expense claims made by office holders covered by the Remuneration Tribunal or by employees with annual salaries above $122,136 are considered to be reasonable if they do not exceed the rate of allowances set by the Remuneration Tribunal (see also paragraphs 74 to 77). The following is the rate of allowance set by the Remuneration Tribunal for the most common salary range for the 1998-99 income year:

salary range overnight
capital city - other
$122,136 - $240,140 $320 / $165

30. The travel allowances paid to Federal Members of Parliament and Federal Parliamentary Secretaries under the arrangements that commenced on 14 April 1998, are considered reasonable amounts to claim for the purposes of the exception from substantiation in section 900-50 of the ITAA 1997. This includes the Capital City and Canberra travel allowances rates for domestic travel, having regard to the circumstances under which those allowances are paid (see paragraphs 78 and 79).

Part-day travel allowance amounts

31. APS employees receive an allowance for travel which necessitates their being absent from their normal workplace and away from their region, on official business, for not less than 10 hours, but which does not require an overnight absence (Part-day travel allowance).

32. The APS Part-day travel allowance is not paid for travel away from the taxpayer's ordinary residence, i.e., the travel does not involve sleeping away from home . This allowance is, therefore, not a travel allowance for the purposes of the exception from substantiation in section 900-50 of the ITAA 1997. Part-day travel allowances received by members of the APS and similar allowances received by other taxpayers should be shown as assessable income in the employees ' tax returns. Any claim for work-related expenses incurred for travel that does not involve sleeping away from home are subject to the normal substantiation requirements.

Reasonable travel allowance expense claims for employee truck drivers who receive a travel allowance

33. Amounts claimed up to the food and drink component only of the APS daily travel allowance payable for 'other country centres' are considered to be reasonable for meal expenses of employee truck drivers who have received a travel allowance and who are required to sleep away from home . For the 1998-99 income year, the relevant amounts are:

salary range food and drink
up to $68,228 Bfast Lunch Dinner
10.00 12.25 22.75
$45.00 per day
above $68,228 Bfast Lunch Dinner
11.25 12.25 25.70
$49.20 per day

(for further information on truck drivers see the Explanations part at paragraphs 80 to 88 and Taxation Ruling TR 95/18).

Reasonable overseas travel allowance expense claims

34. The exception from substantiation in relation to claims for work-related expenses covered by an overseas travel allowance, applies only to expenses for food or drink or incidentals, not for accommodation. Where an overseas travel allowance is received, the amount claimed for work-related expenses incurred is considered reasonable if it does not exceed the relevant food or drink or incidentals component rates for overseas travel allowance paid to members of the APS and public office holders for short-term travel (see paragraphs 89 to 93 below). If a deduction is claimed for more than the reasonable amount, the whole claim must be substantiated, not just the excess over the reasonable amount.

35. The APS overseas rates identify the meals component and the incidentals component separately and the rates for each country are shown in Schedule 1 of this Ruling. The rates of overseas travel allowances payable as at March 1998 are set out in Schedule 1 according to the salary ranges of the following three levels of employees :

Column 1 - Applicable to Secretaries of Departments and to employees whose salary exceeds $122,136 per annum;
Column 2 - Applicable to Senior Executive Service officers and to employees whose salary is in the range $68,228 per annum to $122,136 per annum;
Column 3 - Applicable to other officers and to employees whose salary is less than $68,228 per annum.

36. If an employee travels to a location for which the rate of overseas travel allowance paid to members of the APS and public office holders does not contain a component for food and drink (meals), a reasonable amount for meals may be added to the incidentals component payable to that employee .

37. For the purposes of this Ruling, the reasonable amount for meals for overseas travel is the relevant amount of the meals component of the travel allowance paid to members of the APS and public office holders, depending on their salary and status, for travel within Australia. The current meals components of the domestic travel allowances paid to these employees are as follows:

·
Secretaries of Departments - $63 per day (salary in excess of $122,136 per annum);
·
Senior Executive Service officers - $62 per day (salary in range $68,228 to $122,136 per annum);
·
Other officers - $52.25 per day (salary less than $68,228 per annum).

38. The requirement to add a reasonable meals component to the rate of overseas travel allowance only applies if the employee travels to 'other countries' (i.e., a location not specifically described in Schedule 1). Examples of calculating the reasonable daily overseas meals and incidentals component are in the Examples part at paragraphs 94 and 95.

Explanations

Claiming a deduction

39. Where there is an exception from substantiation, it remains a requirement of the law that the relevant expenditure covered by the award overtime meal allowance or travel allowance qualifies as a deduction under another provision of this Act (subsection 900-15(1) of the ITAA 1997). That is, an award overtime meal allowance or travel allowance expense must satisfy the requirements of Division 8 of the ITAA 1997 before a claim for a deduction can be made.

40. In the case of a domestic or overseas travel allowance, this can generally be satisfied by reference to the employer's arrangements for payment of allowances. The circumstances under which the employer pays the allowance should be considered, e.g., is the allowance paid only in circumstances involving deductible travel? If the allowance is paid in circumstances involving deductible and non-deductible travel, appropriate adjustments should be made.

41. The receipt of a travel allowance or an award overtime meal allowance does not automatically entitle an employee to a deduction, nor does the amount of an allowance received determine if the claim is reasonable. Only the actual amount incurred on work-related travel expenses or award overtime meal allowance expenses can be claimed as a deduction.

42. Award overtime meal allowances or travel allowances paid in deductible circumstances that are equal to or less than the reasonable allowance amount, are not always shown on an employee's group certificate. This can occur, if the employer is reasonably satisfied that the employee will incur deductible expenses at least equal to the amount of the allowance paid, and that the amount paid will be incurred for the purpose for which the allowance was paid (see paragraph 4).

43. If, in the circumstances described in paragraph 42, the employee has incurred deductible expenses at least equal to the amount of the allowance received, the employee does not need to claim a deduction for the expenses . If a deduction is not claimed, the allowance does not need to be shown as assessable income in the employee's tax return.

44. If a deduction is claimed for a travel allowance expense or award overtime meal allowance expense, the total allowance received must be shown as assessable income in the employee's tax return. This is required even if the amount of the allowance has not been shown on the employee's group certificate.

45. If an employee does not incur deductible expenses at least equal to the amount of award overtime meal allowance or travel allowance received, the whole amount of the allowance should be shown as assessable income in their tax return. This is required even if the allowance is not shown on the employee's group certificate. The employee can then claim a deduction for the amount of deductible expenses actually incurred, subject to the substantiation provisions. The exception from substantiation may apply, depending on the amount of the claim.

The requirement to substantiate expenses

46. Under subdivision 900-B of the ITAA 1997, a deduction is not allowable for a work expense, including a meal allowance expense or travel allowance expense, unless the expense qualifies as a deduction under a provision of this Act and written evidence of the expense has been obtained and retained by the employee taxpayer.

47. Broadly speaking, written evidence is a receipt, invoice or similar document that sets out the particulars outlined in subdivision 900-E of the ITAA 1997. Where overseas or domestic travel involves being away for 6 or more nights in a row, a Travel record must also be kept in accordance with subdivision 900-F of the ITAA 1997. The Commissioner considers that a travel diary is an appropriate Travel record for this purpose.

Substantiation exception

48. There are exceptions where written evidence or a Travel record is not required. These exceptions apply to claims for expenses covered by a travel allowance or by an award overtime meal allowance and which are considered by the Commissioner to be reasonable. The travel allowance and award overtime meal allowance must satisfy the definitions in the substantiation provisions. An amount for travel expenses or overtime meal expenses that has been folded-in as part of normal salary/wages, e.g., under a workplace agreement, is not considered to be an allowance.

49. These exceptions do not apply to accommodation expenses for overseas travel. The exception also does not apply to Travel records for overseas travel where the travel involves being away for 6 or more nights in a row, even if an overseas travel allowance is paid (see paragraphs 89 and 90; also see paragraph 91 re members of international flight crews).

50. If the travel allowance expense or award overtime meal allowance expense claimed qualifies for exception from substantiation, it is not necessary to keep written evidence as required under subdivision 900-E of the ITAA 1997. The objective is to relieve taxpayers, who are covered by the exception from substantiation, of the requirement to determine claims from detailed calculations based on records or receipts.

51. However, a taxpayer may still be required to show the basis for determining the amount of their claim and that the expense was actually incurred for work-related purposes. What is a reasonable basis for determining the amount of a claim which is subject to an exception from substantiation, varies according to individual circumstances and the nature of the expense. If necessary, it is acceptable for a reasonable estimate to be the basis for claims having regard to the taxpayer's occupation and the types of expenses that would be expected to be incurred. This is a significantly lesser requirement than the need to keep written evidence.

52. A taxpayer can choose not to use the exception from substantiation. Each taxpayer can decide between maintaining fewer records and claiming the reasonable amount, which in some circumstances may be lower than the amount actually incurred, or keeping written evidence and claiming the full amount of deductible expenses incurred, which may be higher than the reasonable amount.

53. The following table is a summary of the substantiation requirements for claims for work-related travel allowance expenses where the taxpayer is required to sleep away from home when travelling on work.

  Domestic Travel   Overseas Travel  
Travel allowance received and : Written Evidence Travel Diary Written Evidence Travel Diary
the amount claimed does not exceed the reasonable allowance amount - travel less than 6 nights in a row
- travel less than 6 nights in a row No No No* No
- travel 6 or more nights in a row No No No* Yes**
the amount claimed exceeds the reasonable allowance amount
- travel less than 6 nights in a row Yes for the whole claim No Yes No
- travel 6 or more nights in a row Yes for the whole claim Yes Yes Yes**

* Regardless of the length of the trip, written evidence is required for overseas accommodation expenses - but not for food, drink and incidentals (see paragraph 89).

** Members of international air crews do not need to keep a travel diary ( Travel record ) if they limit their claim to the amount of the allowance received (see paragraph 91).

Exception for travel allowance expenses

Must sleep away from home

54. For domestic or overseas travel allowance expenses to be considered for exception from substantiation, the relevant allowance must qualify as a travel allowance. The allowance must be paid to cover work-related travel expenses incurred or to be incurred for travel away from the employee's ordinary residence, undertaken in the course of performing duties as an employee (subsection 900-30(3) of the ITAA 1997). The Commissioner takes the view that the term 'travel away from the employee's ordinary residence' means that the employee must sleep away from their home.

Must cover cost of accommodation, food or drink, or incidentals

55. The travel allowance must be paid to cover the cost of accommodation (domestic travel only) or food or drink or expenses incidental to the travel (paragraph 900-30(3)(b) of the ITAA 1997).

Must cover specific journeys

56. The travel allowance must also be paid for specific journeys undertaken or to be undertaken for work-related travel. A travel allowance which is not paid to cover relevant expenses for specific journeys undertaken or to be undertaken for work-related travel is not a travel allowance for the purposes of the exception from substantiation.

57. Examples of expenses relating to allowances that would not qualify for the exception from substantiation because they are not travel allowances paid to cover deductible expenses for specific journeys are:

(a)
where a fixed annual travel allowance amount of, say, $2,000 a year is paid, regardless of how often or even whether travel is actually undertaken; or
(b)
where a travel allowance is paid at a certain rate per hour for hours worked even if deductible work-related travel is not undertaken.

58. However, a fixed annual entitlement for travel expenses may be a travel allowance where the allowance is based on a specified number of overnight stays and there is a requirement for recipients to repay that part of the entitlement referrable to trips not undertaken.

Must be a bona fide amount

59. For the substantiation exception to apply, the allowance must be a bona fide travel allowance. That is, the amount paid must be an amount that could reasonably be expected to cover accommodation, or meals or expenses incidental to the travel.

60. A token amount of allowance, e.g., $5 a day to cover meals for travel that involves sleeping away from home , would not be considered a payment that is expected to cover the purchase of three meals when travelling for work. The payment would not be considered a travel allowance for the purposes of the exception from substantiation.

61. What is a bona fide amount to cover accommodation or meals or expenses incidental to the travel depends on the facts of each case, including the arrangements for payment of the allowance.

Reasonable amount for meals

62. Subsection 900-50(2) of the ITAA 1997 requires that in determining what is reasonable, the Commissioner must take into account the total losses or outgoings that it would be reasonable to incur for accommodation, food or drink, or expenses incidental to the travel. In determining the reasonable amount of a claim for meals, reference should be made to the period of the travel. That is, what expenses on meals (e.g., breakfast, lunch, dinner) it is reasonable to incur from the time the travel commences to the end of the travel period, given the individual employment circumstances of that taxpayer.

63. Example: Janet travels from her normal work place in Sydney to attend a meeting in Canberra. She leaves Sydney at 5.00 pm on Monday and stays 1 night in Canberra, returning to Sydney at 4.30 pm on the Tuesday. It is reasonable to expect Janet to incur the following meal expenses while travelling for work: Monday - dinner; Tuesday - breakfast and lunch.

64. Example: Phil is a truck driver who is based in Brisbane. He regularly drives his truck from Brisbane to Maryborough. After unloading the truck he sleeps in the cabin for 5 or 6 hours before returning home. If Phil leaves Brisbane at 3.00 pm and returns home at 9.00 am the next day, it is reasonable for Phil to incur expenses on 2 meals - dinner and breakfast.

Exception for award overtime meal allowance expenses

65. For overtime meal expenses to be considered under the exception from substantiation, the award overtime meal allowance must be paid to cover the cost of food or drink in connection with a specific occasion when overtime is worked. The overtime meal allowance must be paid or payable under a law of the Commonwealth or of a State or Territory, or an award, order, determination or industrial agreement in force under such a law (section 900-60 of the ITAA 1997). An amount for overtime meals that has been folded-in as part of normal salary or wages, e.g., under a workplace agreement, is not considered to be an overtime meal allowance.

66. The following table is a summary of the substantiation requirements for claims for award overtime meal allowance expenses .

  Deduction allowable Written evidence
An award overtime meal allowance is paid and the claim for expenses incurred does not exceed $15 per meal Yes * No
An award overtime meal allowance is paid and the claim for expenses incurred exceeds $15 per meal Yes * Yes for whole claim
Non award allowance or no allowance paid No deduction allowed Not applicable

* Deduction allowable provided the amount of expense claimed was actually incurred to buy food or drink in connection with overtime worked. A deduction is not automatically allowable up to the reasonable amount of $15 per meal.

Reasonable allowance amount

67. In setting the reasonable allowance amounts, the Commissioner adopts the rates set for APS travel which take into account the costs of food, drink and accommodation in a range of regions and establishments, as well as salary levels. The Commissioner also sets amounts for special occupational groups. That is, the rates are set so as to compensate fairly an employee for the average cost of a meal or accommodation and expenses incidental to the travel, on the basis that when the expense is incurred, the employee is neither out of pocket nor able to retain appreciable amounts of unspent allowance.

68. Against that background, where a work-related travel allowance is received and the claim for work-related travel expenses which are covered by the allowance does not exceed rates of travel allowances set for members of the APS, the travel expenses claimed are treated as reasonable (see paragraphs 19 to 30 and 33 to 38).

69. In concluding that such travel allowance expense claims are reasonable, recognition is given to the fact that APS travel allowances are only paid where an application by the employee for travel is approved and deductible work-related travel is undertaken or will be undertaken. These conditions for payment of the allowance satisfy the requirements of the definitions of 'travel allowance expense' and 'travel allowance' in subsections 900-30(2) and (3) of the ITAA 1997.

70. Further recognition is given to the fact that APS travel allowance rates are based on an analysis of data obtained from surveys of accommodation and meal costs in capital cities and other regional centres. The resulting allowance rates reflect the average costs of food, drink and accommodation in each centre, excluding costs of sub-standard establishments on the one hand, and costs of specific high cost (usually remote) areas on the other.

71. Similarly, to determine the overtime meal allowance amount, surveys are conducted in a range of areas and establishments to ascertain the costs of food and drink. These surveys take into account a variety of food and drink from different establishments and regions where it would be reasonable to purchase food and drink during a meal break while working overtime.

72. Any variation to a reasonable amount set out in this Ruling would be considered only in unique or unusual circumstances where there are strong grounds for departure from that reasonable amount. Some unique circumstances may be when a taxpayer travels for work to an area where there has been a natural disaster or where, at the time of the travel, a significant event such as the Olympic Games or World Expo is being held. In these circumstances, there may be grounds for departure from the Commissioner's published reasonable amounts for those journeys.

73. The fact that a travel allowance or award overtime meal allowance amount has been approved by the Industrial Relations Commission or indexed in accordance with the CPI movement is not, on its own, considered sufficient basis for an application to vary the reasonable amounts set out in this Ruling.

employees with annual salaries above $122,136 or office holders covered by the Remuneration Tribunal

74. Daily domestic travel allowance expense claims made by office holders covered by the Remuneration Tribunal or by employees with salary ranges above $122,136 are considered reasonable if they do not exceed the rate of allowances set by the Remuneration Tribunal (see paragraph 29 and 30).

75. The Tribunal inquires into the allowances to be paid to Ministers, other Members of Parliament, officers of the Parliament, holders of office of Justice, judges of a Federal Court and certain public office holders such as Secretaries of Departments. The Inquiry receives submissions from interested parties, examines relevant salary movements and takes account of price movements relevant to the kinds of expenditures for which the allowances are paid.

76. The Tribunal rate covers accommodation, meals and incidental expenses incurred when travelling within Australia. With the exception of the special Canberra travel allowance for Federal Members of Parliament, the rate set by the Tribunal for the cost of accommodation covers accommodation at commercial establishments such as hotels, motels and serviced apartments.

77. Where accommodation is provided, the Commissioner accepts as reasonable, the amount for meals and incidentals for relevant office holders as determined by the Tribunal. If the amount for meals and incidentals is not specified by the Tribunal, the Commissioner accepts the amount shown for meals and incidentals at paragraph 26(i) of this Ruling for salaries of $68,228 and above and paragraph 26(ii) for salaries below $68,228. Overseas travel is covered by the APS rates according to salary level or equivalent classification for relevant office holders covered by the Tribunal, as shown at Schedule 1.

Travel allowances for Federal MPs

78. The Canberra travel allowance recognises that most Federal Members make 'more settled accommodation arrangements in Canberra'. This travel allowance is paid at a rate below that for full commercial accommodation, meals and incidentals. The Capital City travel allowance for commercial accommodation reflects the costs associated with taking up accommodation in commercial establishments such as hotels, motels and serviced apartments in capital cities other than Canberra.

79. The Capital City travel allowance for non-commercial accommodation is paid if accommodation is not taken up in a commercial establishment. The rate for this travel allowance is one-third of the commercial rate to cover the cost of meals and incidental travel expenses . Having regard to the circumstances under which Canberra and Capital City travel allowances are paid to Federal Members, the Commissioner accepts as reasonable, claims for expenses incurred up to the amount of allowance received (see paragraphs 40 to 45).

employee truck drivers who receive a travel allowance

80. An employee truck driver who, in the course of earning his or her income, is required to sleep away from home , is considered to be travelling for work and may incur meal expenses as part of a work related travel expense. Truck drivers generally do not incur accommodation expenses when travelling for work as they sleep in their truck. Accommodation expenses incurred as part of work-related travel must be substantiated with written evidence as described in subdivision 900-E of the ITAA 1997. Paragraph 33 sets out the reasonable amounts for food and drink expenses incurred by employee truck drivers as part of a travel allowance expense.

81. Subsection 900-50(2) of the ITAA 1997 requires that in determining what is reasonable, the Commissioner must take into account the total losses or outgoings it would be reasonable to incur for accommodation, food or drink, or expenses incidental to the travel. In determining the reasonable amount to claim for meals, reference should be made to the period of the travel. That is, what meals (e.g., breakfast, lunch, dinner) would it be reasonable to incur from the time the travel commences to the end of the travel period, given the individual employment circumstances of the taxpayer.

82. If an employee truck driver, who receives a travel allowance and incurs work-related meal expenses , claims as a deduction an amount greater than the amount considered to be reasonable, the whole claim, not just the excess over the reasonable amount, must be substantiated by written evidence. Travel records also need to be kept for work-related travel of 6 or more nights in a row. Taxation Ruling TR 95/18 contains detailed information on the written evidence and Travel records required to substantiate travel expenses , including meal expenses , for employee truck drivers.

83. The receipt of a travel allowance does not automatically entitle the employee truck driver to a deduction for travel expenses , nor does the amount of a travel allowance received determine if the claim is reasonable. Only the actual amount incurred on work-related travel expenses can be claimed as a deduction.

employee truck drivers who do not receive a travel allowance

84. Claims for work-related travel expenses by employee truck drivers who are required to sleep away from home and who do not receive a travel allowance, must be substantiated. Written evidence is required to substantiate accommodation, meal and other work-related travel expenses . Travel records must be kept for work-related travel of 6 or more nights in a row. Taxation Ruling TR 95/18 contains detailed information on the written evidence and Travel records required to substantiate travel expenses for employee truck drivers.

Truck drivers who are owner-drivers

85. Subdivision 900-D of the ITAA 1997 refers to the substantiation of business travel expenses and requires that Travel records and written evidence be kept in accordance with subdivision 900-E and subdivision 900-F of the ITAA 1997. Travel records (e.g., a travel diary or similar record of activities undertaken during the travel) must be kept for travel of 6 or more nights in a row.

86. An owner-driver who, in the course of earning his or her income, is required to sleep away from home , is considered to be travelling on business and may incur meal expenses as part of a travel expense. As owner-drivers do not receive a travel allowance, Travel records and written evidence are required to substantiate accommodation, meal and other travel expenses .

87. In most cases a receipt can be obtained for the cost of a meal, for example, where it is purchased from a roadhouse with dining or takeaway facilities. It is considered reasonable for a truck driver to obtain receipts for meal expenses incurred in roadhouses or similar food outlets (e.g., fast food chains or diners).

88. It may not be reasonable for a truck driver to obtain receipts for some food and drink purchases from vending machines or outlets, such as roadside caravans, that do not normally provide receipts. These expenses are considered 'otherwise too hard to substantiate' (section 900-130) and must be supported by a diary or similar record containing details in accordance with subsection 900-125(3) of the ITAA 1936.

Reasonable overseas travel allowance expense claims

89. For overseas travel covered by an allowance, reasonable amounts are determined for food or drink or incidental expenses only. Under section 900-55 of the ITAA 1997, taxpayers must still obtain written evidence for accommodation expenses . A Travel record must also be kept if the overseas travel involves being away from the taxpayer's ordinary residence for 6 or more nights in a row.

90. A Travel record is a record of activities undertaken during the travel (subdivision 900-F of the ITAA 1997). It is not a record of expenses incurred during the travel. The purpose of a Travel record is to show what activities were undertaken in the course of producing assessable income, so that expenses or portions of those expenses can be attributed to those income-earning activities.

91. Under section 900-65 of the ITAA 1997 crew members of international flights need not keep Travel records (i.e., a record of activities undertaken during the travel). The exception is from keeping Travel records only. It is not an exception from keeping written evidence for travel expenses if required. The exception from keeping Travel records applies if:

(i)
the allowance covers travel by the taxpayer as a crew member of an aircraft; and
(ii)
the travel is principally outside Australia; and
(ii)
the total of the losses or outgoings claimed for the travel that are covered by the allowance, does not exceed the allowance received.

92. The relevant APS rates for overseas travel are detailed in the APS 'Personnel Management Manual, Volume 9, Schedule 2/C/A'. (This schedule is available on disc and is updated on a fortnightly basis. It is available on an annual subscription basis (ask for 'PMM Vol 9' from the Australian Government Publishing Service, GPO Box 84, CANBERRA, ACT 2601, phone toll free 132 447 or (02) 6295 4411). Schedule 2/C/A comprises parts A, B and C, which deal with overseas travel allowances paid to Secretaries of Departments, Senior Executive Service officers and other officers respectively (see also paragraphs 34 to 38 and Schedule 1 of this Ruling).

93. If an employee , who receives an overseas travel allowance and incurs work-related travel expenses , claims a deduction in excess of the reasonable meal and incidentals amount, the whole claim must be substantiated, not just the excess over the reasonable amount. Written evidence must be obtained for overseas accommodation expenses regardless of whether an overseas travel allowance is received.

Examples

Calculation of reasonable daily overseas travel allowance amounts

Allowance containing a meals component

94. An employee travels to Italy on business for two weeks and is paid a travel allowance of $300 per day ($100 for meals and incidentals and $200 for accommodation). The employee's annual salary is $69,000 and, at the time of travel, the exchange rate is 1178 lira to one Australian dollar ($A1). The reasonable daily overseas travel allowance expense claim is calculated as follows:

(1)
At a salary of $69,000 per annum, the daily meals and incidentals allowance payable for Italy is 160,982 lira (Schedule 1);
(2)
Converting the lira allowance to Australian dollars at the exchange rate prevailing at the time of travel, provides the reasonable daily overseas travel allowance claim for meals and incidental expenses :

160982/1178 = $A136.66

The employee claims a deduction for meals and incidentals expenses actually incurred of $120 per day. As the employee is claiming a deduction which is less than the reasonable amount of $136.66 per day, the employee does not need to keep written evidence to substantiate expenditure on meals and incidental expenses . The employee is required, however, to maintain a Travel record and to keep receipts or other documentary evidence to substantiate accommodation expenses .

Allowance without a meals component

95. An employee travels overseas on business for four days and is paid a travel allowance of $300 per day for meals, incidentals and accommodation. The employee's annual salary is $33,000. The employee travels to a country in Europe that is not listed on the schedule of APS rates. The reasonable daily overseas travel allowance expense claim is calculated as follows:

(1)
At a salary of $33,000 per annum the incidentals allowance payable for 'other countries - Europe' as per Schedule 1 is $32.00 Australian (there is no meals component);
(2)
Add to the incidentals component of $32.00 the relevant meals component amount (described at paragraph 37), i.e., $52.25;
(3)
The resulting total of $84.25 Australian is the reasonable daily overseas travel allowance expense claim for meals and incidentals for 'other countries' at the time of travel.

As the travel allowance paid to the employee does not specify the components of the allowance, the employee is entitled to claim up to $A84.25 per day for expenses incurred on meals (i.e., food and drink) and incidentals without substantiation. Written evidence is required to substantiate any accommodation costs claimed.

SCHEDULE 1

REASONABLE OVERSEAS TRAVEL ALLOWANCE AMOUNTS

Meal and incidental allowances

The amounts listed for all countries and cities shown in the following pages of this Schedule show separate amounts for both meals and incidentals. If a country or city does not appear in this Schedule, an incidentals only component is shown at the end of the Schedule under 'other countries'. A meals component can be added to the incidentals component as shown in the example at paragraph 95.

Column 1 = Applicable to Secretaries of Departments and to employees whose salary exceeds $122,136 per annum.
Column 2 = Applicable to Senior Executive Service officers and to employees whose salary is in the range $68,228 to $122,136 per annum.
Column 3 = Applicable to other officers and to employees whose salary is less than $68,228 per annum.

Note that '(note a)' in the following tables in Schedule 1 means:


'The cost of accommodation at this locality includes breakfast. The amount specified for meals is for lunch and dinner only.'
COUNTRY/CITY (All amounts shown are in whole units of currency) COLUMN 1 COLUMN 2 COLUMN 3 CURRENCY
Secretaries SES Other
Meals Incidentals Meals Incidentals Meals Incidentals
ARGENTINA 122 31 92 23 83 21 USD
AUSTRIA 1230 414 923 311 839 282 ATS
BAHRAIN 37 11 31 8 28 7 BHD
BANGLADESH 3698 1060 2774 795 2521 723 BDT
BARBADOS 282 66 212 49 193 45 BBD
BELGIUM 4019 1156 3014 867 2740 788 BEF
BELGRADE 105 27 79 20 72 19 USD
BRAZIL (note a) 96 31 72 23 65 21 USD
BRUNEI 153 42 115 31 104 29 BND
CAMBODIA (note a) 62 32 46 24 42 22 USD
CANADA 106 38 79 29 72 26 CAD
CHILE 90 28 68 21 62 19 USD
CHINA - Hong Kong 1018 259 764 194 694 177 HKD
CHINA - other mainland locality 874 247 655 186 596 169 CNY
CHINA - elsewhere 3024 990 2268 743 2061 675 TWD
COOK ISLANDS 176 46 132 34 120 31 NZD
CYPRUS 48 14 36 10 33 9 CYP
DENMARK 921 261 693 196 630 179 DKK
EGYPT 281 96 211 72 192 65 EGP
FIJI 111 41 83 31 76 28 FJD
FINLAND 629 200 473 150 430 136 FIM
FRANCE 626 196 469 147 427 133 FRF
GERMANY (note a) 135 56 101 42 92 38 DEM
GHANA 66 22 50 17 45 15 USD
GREECE 24456 8090 18342 6068 16675 5516 GRD
HUNGARY (note a) 7638 5052 5729 3789 5208 3445 HUF
INDIA 2145 897 1609 673 1463 612 INR
INDONESIA 72 27 54 20 49 18 USD
IRAN 204356 80033 153267 60025 139333 54568 IRR
IRELAND 68 20 51 15 47 14 IEP
ISRAEL 127 34 95 25 86 23 USD
ITALY 164566 49851 123425 37557 112204 34143 ITL
JAPAN 17584 5148 13188 3861 11989 3510 JPY
JORDAN 42 20 32 15 29 13 JOD
KAZAKSTAN 116 32 87 24 79 22 USD
KENYA 4888 1791 3666 1343 3333 1221 KES
KIRIBATI 121 39 91 29 82 26 AUD
KOREA, Republic of 117957 26468 88468 19851 80425 18046 KRW
KUWAIT 29 8 22 7 20 6 KWD
LAOS (note a) 47 28 35 21 32 19 USD
LEBANON 141 32 106 24 97 22 USD
MALAYSIA 179 76 134 57 122 52 MYR
MALTA 40 10 30 8 27 7 MTL
MARSHALL ISLANDS 103 34 78 26 70 23 USD
MAURITIUS (note a) 1350 517 1012 388 920 352 MUR
MEXICO 88 29 66 22 60 20 USD
MICRONESIA 72 25 54 19 49 17 USD
MYANMAR 70 33 53 24 48 22 USD
NEPAL 3604 1506 2703 1129 2457 1027 NPR
NETHERLANDS 194 55 145 42 132 38 NLG
NEW CALEDONIA 11958 3418 8969 2563 8153 2330 XPF
NEW ZEALAND 143 41 107 30 97 28 NZD
NIGERIA 8194 2461 6146 1846 5587 1678 NGN
NORWAY (note a) 841 323 633 243 575 221 NOK
OMAN 39 11 30 8 27 7 OMR
PAKISTAN 2447 971 1858 728 1689 662 PKR
PALAU 117 29 87 22 80 20 USD
PAPUA NEW GUINEA 129 40 97 30 88 27 PGK
PHILIPPINES 2022 731 1517 548 1379 498 PHP
POLAND (note a) 46 23 34 17 31 16 USD
RUSSIA 212 37 159 28 145 25 USD
SAUDI ARABIA 325 106 243 80 221 72 SAR
SINGAPORE 147 44 110 33 100 30 SGD
SOLOMON ISLANDS 301 100 226 75 205 68 SBD
SOUTH AFRICA 292 105 219 78 199 71 ZAR
SPAIN 12116 4152 9087 3114 8261 2831 ESP
SRI LANKA 3919 1498 2939 1124 2672 1022 LKR
SWEDEN (note a) 574 265 430 198 391 180 SEK
SWITZERLAND 215 55 161 41 146 37 CHF
SYRIA 5727 1421 4295 1066 3905 969 SYP
TANZANIA 54220 19610 40770 14750 37060 13410 TZS
THAILAND 1867 772 1400 579 1273 526 THB
TONGA 132 35 99 26 90 24 TOP
TURKEY 78 26 59 20 53 18 USD
TUVALU 68 40 51 30 47 27 AUD
UNITED ARAB EMIRATES 384 100 288 75 262 68 AED
UNITED KINGDOM 66 21 50 16 45 14 GBP
USA - HAWAII 117 35 88 26 79 24 USD
USA - NEW YORK CITY 126 39 95 29 86 26 USD
USA - elsewhere 97 29 73 22 66 20 USD
VANUATU 15370 3616 11527 2712 10479 2465 VUV
VENEZUELA 80 26 60 19 55 18 USD
VIETNAM 79 28 59 21 54 19 USD
WESTERN SAMOA 161 70 121 53 110 48 WST
ZAMBIA 75 27 56 20 51 18 USD
ZIMBABWE (note a) 417 283 313 212 285 193 ZWD
OTHER COUNTRIES (amount are for incidental expenses only)
- EUROPE - 47 - 35 - 32 AUD
- SOUTH AMERICA - 39 - 29 - 26 AUD
- ELSEWHERE - 35 - 26 - 24 AUD

Detailed contents list

96. The following detailed contents list refers to the paragraph references in the body of this Ruling or the page number of this Ruling when referring to a Schedule.

  paragraph
What this Ruling is about 1
Class of person/arrangement 1
Date of effect 6
Previous Rulings 7
Definitions 8
Ruling 9
Substantiation 9
Substantiation exception 13
Award overtime meal allowance expense exception 17
Reasonable overtime meal allowance expense claims 18
Travel allowance expense exception 19
Reasonable domestic and overseas travel allowance expense claims 21
Reasonable domestic travel allowance amounts 24
Daily travel allowance expense claims 24
Reasonable daily travel allowance amounts 26
employees with annual salaries above $122,136 or office holders covered by the Remuneration Tribunal 29
Part-day travel allowance amounts 31
Reasonable travel allowance expense claims for employee truck drivers who receive a travel allowance 33
Reasonable overseas travel allowance expense claims 34
Explanations 39
Claiming a deduction 39
The requirement to substantiate expenses 46
Substantiation exception 48
Exception for travel allowance expenses 54
Must sleep away from home 54
Must cover cost of accommodation, food or drink, or incidentals 55
Must cover specific journeys 56
Must be a bona fide amount 59
Reasonable amount for meals 62
Exception for award overtime meal allowance expenses 65
Reasonable allowance amount 67
employees with annual salaries above $122,136 or office holders covered by the Remuneration Tribunal 74
Travel allowances for Federal MP's 78
employee truck drivers who receive a travel allowance 80
employee truck drivers who do not receive a travel allowance 84
Truck drivers who are owner-drivers 85
Reasonable overseas travel allowance expense claims 89
Examples 94
Calculation of reasonable daily overseas travel allowance amounts 94
Allowance containing a meals component 94
Allowance without a meals component 95
SCHEDULE 1 - Reasonable overseas travel allowance amounts
Meal and incidental allowances
Detailed contents list 96

Commissioner of Taxation
24 June 1998

Not previously released to the public in draft form

References

ATO references:
NO 98/6080-1, 97/3772-3, 96/4347-8, 95/8179-6

ISSN 1039 - 0731

Related Rulings/Determinations:

IT 2583
TR 93/22
TR 94/23
TR 95/18
TR 95/26
TR 96/21
TR 97/14

Subject References:
accommodation allowances
allowances
award overtime and allowances
domestic travel allowance
exception from substantiation
judges
meal allowance
meals
members of parliament
overseas travel allowance
overseas travel expenses
overtime meal allowances
owner drivers
parliamentarians
reasonable allowances
reasonable claim
substantiation
travel
travel allowances
travel diary
travel expenses
travel record
truck drivers
work-related expense
written evidence

Legislative References:
ITAA36 221A
ITAA97 8
ITAA97 8-1
ITAA97 900
ITAA97 900-12
ITAA97 900-B
ITAA97 900-15(1)
ITAA97 900-30(2)
ITAA97 900-30(3)
ITAA97 900-30(3)(b)
ITAA97 900-50
ITAA97 900-50(2)
ITAA97 900-55
ITAA97 900-60
ITAA97 900-65
ITAA97 900-D
ITAA97 900-E
ITAA97 900-125(3)
ITAA97 900-130
ITAA97 900-150
ITAA97 900-F

TR 98/10 history
  Date: Version: Change:
You are here 24 June 1998 Original ruling  
  27 April 2016 Withdrawn