ATO Interpretative Decision

ATO ID 2002/571 (Withdrawn)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• This ATO ID is withdrawn from the database as it is superseded by Taxation Ruling TR 2004/6.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

Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for overtime meal expenses where the overtime meal allowance is folded-in as part of their ordinary wages?

Decision

No. The taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for overtime meal expenses where the overtime meal allowance is folded-in as part of their ordinary wages.

Facts

The taxpayer is an employee receiving salary and wage income.

As part of workplace agreement negotiated with the taxpayer's employer a meal allowance was folded-in as part of the taxpayer's ordinary wages.

No meal allowance was included as a separate item on the taxpayer's Payment Summary.

The taxpayer incurred meal expenses while working overtime.

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, or relate to the earning of exempt income. A deduction will also not be allowable if another provision of the Act prevents it.

The cost of meals is generally considered to be a private expense and not deductible under section 8-1 of the ITAA 1997 unless the expense is considered to be a work expense incurred in producing salary or wages. Meal allowance expenses are work expenses if they are incurred for food or drink and are covered by a meal allowance (subsection 900-30(4) of the ITAA 1997). A meal allowance is an amount that the employer pays to an employee to enable the employee to purchase food or drink (subsection 900-30(5) of the ITAA 1997).

Section 32-5 of the ITAA 1997 provides that any loss or outgoing in respect of providing entertainment will not be deductible under section 8-1 of the ITAA 1997. Entertainment is defined to include food or drink (subsection 32-10(1) of the ITAA 1997).

However, section 32-50 of the ITAA 1997 at item 5.1 provides that section 32-5 of the ITAA 1997 will not apply to prevent a deduction if;

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the purchase of food or drink is in connection with overtime worked by a taxpayer; and

•

the taxpayer receives an allowance under an industrial instrument to buy the food or drink.

An industrial instrument includes an award or industrial agreement (section 995-1 of the ITAA 1997).

Taxation Ruling TR 2001/4 deals with what are considered to be reasonable allowances for the 2001-2002 income year. Paragraph 79 of TR 2001/4 provides that 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.

As the taxpayer has not received a separate overtime meal allowance in connection with a specific overtime occasion, they have not received an allowance for the purposes of section 32-50 of the ITAA 1997.

Accordingly, the taxpayer is not entitled to claim a deduction for overtime meal expenses under section 8-1 of the ITAA 1997.

Year of income:  Year ended 30 June 1998 Year ended 30 June 1999 Year ended 30 June 2000 Year ended 30 June 2001

Legislative References:
Income Tax Assessment Act 1997
   section 8-1
   section 32-5
   subsection 32-10(1)
   section 32-50

Related Public Rulings (including Determinations)
Taxation Ruling TR 2001/4

Keywords
Deductions and expenses
Overtime meal allowances
Award overtime meal allowances

Business Line:  Small Business/Individual Taxpayers

Date of publication:  31 May 2002

ISSN: 1445-2782