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Edited version of private ruling

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Ruling

Subject: work-related expenses

Are you entitled to claim a deduction, calculated using the reasonable allowance amounts, for your meal and incidental expenses while you were overseas?

No.

This ruling applies for the following periods:

Year ended 30 June 2009

Year ended 30 June 2010

The scheme commences on:

1 July 2008

Relevant facts and circumstances

You travelled overseas to work on behalf of your employer.

You were provided with accommodation, and your family accompanied you on your trips.

You maintained your residence in Australia while you were away.

You incurred expenses for your meals and incidentals while you were overseas.

You were paid an allowance to assist with expenses incurred for meals and incidentals.

You wish to claim a deduction, calculated using the reasonable allowance amounts.

You withdrew funds from your account and paid for the meals and incidentals in cash.

You are unable to substantiate your costs for meals and incidentals.

The amount received was shown as a travel allowance on your payslips.

The allowance was not shown as a separate payment on your PAYG payment summary.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Division 900

Income Tax Assessment Act 1997 Subdivision 900-B

Income Tax Assessment Act 1997 Section 900-55

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (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. 

The cost of meals and incidentals incurred in the course of work-related travel away from home may be deductible. However, section 900-10 of the ITAA 1997 requires the taxpayer to substantiate the expenses and provide written evidence and travel records. 

Taxation Ruling TR 2004/6 explains that a taxpayer cannot automatically claim a deduction just because they receive an allowance. The expense must meet the requirements of section 8-1 of the ITAA 1997. Also, the taxpayer must have actually incurred the expense and be able to meet the substantiation requirements.

Substantiation

Division 900 of the ITAA 1997 sets out the substantiation requirements for claiming expenses. The written evidence that must be maintained in respect of work related travel expenses can be a receipt, invoice or similar document obtained at the time the expense was incurred or as soon as reasonably practicable thereafter.

If the required written evidence is not available, generally the expenses cannot be claimed as a deduction.

Exception from substantiation

Subdivision 900-B of the ITAA 1997 provides an exception from the substantiation requirements for a travel allowance expense for travel outside of Australia. Section 900-55 of the ITAA 1997 provides that you can deduct such an expense without getting written evidence if the Commissioner considers reasonable, the total of the outgoings you claim for travel covered by the allowance.

The exception from substantiation for overseas travel allowance expenses provided by section 900-55 of the ITAA 1997 will only apply where you received a bona fide travel allowance.

TR 2004/6 defines that a bona fide travel allowance is an amount that could reasonably be expected to cover accommodation, or meals or expenses incidental to travel. This does not require that the amount paid by the employer must equate dollar for dollar to the employees actual expenditure. However, there must be relativity between the quantum of the travel allowance and the purpose for which it is said to be paid.

The ruling further states that a token amount of allowance, for example $5 per 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 per day while travelling for work. The payment would not be considered a travel allowance for the purpose of the exception from substantiation.

Your circumstances

In your case, your employer paid you an allowance calculated on a daily amount. The allowance was to assist you to cover your costs for meals and incidentals while working overseas. Taxation Determination TD 2008/18 reasonable allowance amount limits for a cost group five country for the 2009 income year is $185 for meals and $40 for incidental expenses. The amount you received is considerably less than this. It is considered that the allowance you received could not be reasonably expected to cover meals or expenses incidental to travel. As such, the allowance you received is not a bona fide travel allowance for the purposes of the exception from substantiation.

As you did not receive a bona fide travel allowance, the exception from substantiation provided by section 900-55 of the ITAA 1997 does not apply. Therefore, you are not entitled to claim a deduction, calculated using the reasonable allowance amounts, for your meal and incidental expenses while you were overseas.


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