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Ruling

Subject: Meals

Question

Can you claim a deduction for meals without substantiation?

Answer: No.

This ruling applies for the following period

Year ended 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts

You are an employee.

You are required to travel to overseas offices for work purposes.

Your employer does not pay you either a living away from home or a travel allowance. However, you received a substantial pay increase to cover living, meal and incidental costs.

You have not retained evidence of your meal expenses.

You kept a travel diary and accommodation receipts.

Your employer claimed it was too hard for them to determine an allowance amount and informed you to claim your travel expenses on your personal tax return.

Your employer did not advise you on how to claim the expenses.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 900-30

Income Tax Assessment Act 1997 Section 900-50

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 the course of gaining or producing assessable income, but are not allowable to the extent that they are of a capital, private or domestic nature.

Meal expenses are normally private or domestic in character. However, where a taxpayer is away from home overnight in connection with an income producing activity, meal expenses are deductible under section 8-1 of the ITAA 1997. The expenditure is not considered private because its occasion is the taxpayer's travel away from home on income producing activities.

As a general rule, written evidence is required to substantiate any expense you wish to claim as a deduction.

Section 900-50 of the ITAA 1997 provides that the substantiation requirement to obtain written evidence does not apply to claims by employee taxpayers for expenses covered by a bona fide travel allowance if the amount of the claim for expenses incurred does not exceed the amount the Commissioner considers reasonable (Taxation Determination TD 2009/15). 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) and which involves sleep away from home. The work-related travel expenses must be for accommodation, or food or drink, or expenses incidental to the travel.

Taxation Ruling TR 97/24 deals with relief from the effects of failing to substantiate. The Ruling provides guidance on the three circumstances in which Subdivision 900-H of the ITAA 1997 may apply to grant relief where expenses have not been substantiated. These are:

· where there is sufficient evidence to indicate that the taxpayer has incurred the expense and is entitled to a deduction;

· where the only reason for the failure to substantiate was a reasonable expectation that substantiation would not be needed; or

· where documents have been lost or destroyed despite the taxpayer taking reasonable precautions.

An expectation that the substantiation requirements would not apply, based on a lack of knowledge of the law, is not sufficient to attract the operation of this provision.

For this discretion to apply, the nature and quality of the evidence available to substantiate an expense must satisfy the Commissioner that a taxpayer incurred the expense and there is an entitlement to deduct the amount claimed under another provision of the Act.

In your case, as you do not receive a bona fide travel allowance, you cannot use the reasonable allowance amounts contained in TD 2009/15. You are therefore required to substantiate any work related meal expenses in order to claim a deduction.

In relation to the substantiation relief provisions, the law is clear that evidence to support claims is required. Your documents were not lost or destroyed. Rather, you failed to retain the evidence of your meal expenses.

We acknowledge that you have kept a travel diary and accommodation receipts, however these are not considered to be evidence of your meal expenses. There is no way to determine the quantum of any meal expenses even though it is reasonable to expect that expenses were incurred. Therefore, relief from substantiation is not granted.

In summary, you cannot use the reasonable allowance amounts and relief from substantiation is not granted. Therefore, as you do not have substantiation for your meal expenses, you are not entitled to a deduction.

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