ATO Interpretative Decision

ATO ID 2002/547 (Withdrawn)

Income Tax

• This ATO ID is withdrawn from the database as it is superseded by Taxation Ruling TR 2004/6.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Are the cost of meals and incidentals incurred while overseas deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) where the taxpayer has failed to keep travel records?

Decision

No. The cost of meals and incidentals incurred while overseas are not deductible under section 8-1 of the ITAA 1997 as the taxpayer has failed to keep adequate travel records.

Facts

The taxpayer went to an overseas country for a period exceeding 6 nights as part of their job. Their employer paid airfares, accommodation costs and provided the taxpayer with a living allowance.

The taxpayer did not keep receipts for the costs of meals and incidentals.

The taxpayer did not keep a travel diary or other document to record their activities while overseas.

Reasons for Decision

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature.

Expenditure on the daily necessities of life (for example food and drink) are generally a private expense and are not incurred in gaining or producing assessable income.

The issue of the deductibility of meals was considered by the Full Federal Court in Federal Commissioner of Taxation v. Cooper (1991) 29 FCR 177; (1991) 21 ATR 1616; 91 ATC 4396 where Hill J stated:

'Food and drink are ordinarily private matters, and the essential character of expenditure on food and drink will ordinarily be private rather than having the character of a working or business expense. However, the occasion of the outgoing may operate to give to expenditure on food and drink the essential character of a working expense in cases such as those illustrated of work-related entertainment or expenditure incurred while away from home.'

The reference to 'expenditure incurred while away from home' is a reference to the situation where a taxpayer must travel away from home for the purpose of their employment. Where a taxpayer is required to travel for work purposes, the cost of meals may be deductible.

It is clear that the taxpayer's overseas travel was work related travel as their employer paid for their airfares, accommodation and provided a living allowance. A deduction may therefore be allowable for the meals and incidentals expenses, or some portion thereof, under section 8-1 of the ITAA 1997.

In order to deduct certain losses or outgoings, section 900-10 of the ITAA 1997 requires that the taxpayer must be able to substantiate the expenses. In order to claim work expenses the taxpayer needs to provide written evidence (for example receipts).

Work expense includes a travel allowance expense (subsection 900-30(2) of the ITAA 1997). A 'travel allowance' is defined in subsection 900-30(3) of the ITAA 1997 and would include the living allowance paid by the taxpayer's employer.

Under section 900-55 of the ITAA 1997, a taxpayer can deduct a travel allowance expense without providing written evidence of the expense in certain circumstances. However this does not absolve a taxpayer from the need to keep travel records as required by section 900-20 of the ITAA 1997. Section 900-20 of the ITAA 1997 provides that the taxpayer must keep travel records if the expense being claimed is for travel that involves them being away from their ordinary residence for 6 or more nights in a row. This applies whether the travel is inside or outside of Australia.

The purpose of a travel record is to show what activities were undertaken in the course of producing assessable income so that any expenses, or a portion of them, can be attributed to income producing purposes (section 900-145 of the ITAA 1997).

Under section 900-150 of the ITAA 1997, a taxpayer is required to keep a record, such as a diary, in which they provide the following:

•

the nature of the activity

•

the day and approximate time when it began

•

how long it lasted; and

•

where it was engaged in.

However under section 900-195 of the ITAA 1997 the failure to substantiate may not affect the right to a deduction if the nature and quality of the evidence that the taxpayer has to support their claim satisfied the Commissioner that the expense has been incurred and that it is deductible.

The taxpayer has not kept any records and has made no attempt to provide written evidence of either the meal and incidental expenses incurred or the business activities undertaken. In these circumstances the Commissioner is not satisfied that the expenses incurred would be deductible as there is no basis on which to determine whether they relate to business activities. Accordingly, the taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for their meal and incidental expenses.

Year of income:  Year ended 30 June 2001 Year ended 30 June 2000

Legislative References:
Income Tax Assessment Act 1997
   section 8-1
   section 900-10
   section 900-20
   subsection 900-30(2)
   subsection 900-30(3)
   section 900-55
   section 900- 145
   section 900- 150
   section 900-195

Case References:
Federal Commissioner of v. Cooper
   (1991) 29 FCR 177
   (1991) 21 ATR 1616
   91 ATC 4396

Keywords
Meal & food expenses
Overseas travel expenses
Travel expenses
Travel diaries
Reasonable domestic or overseas work related travel allowances
Substantiation

Business Line:  Small Business/Individual Taxpayers

Date of publication:  31 May 2002

ISSN: 1445-2782