Edited version of private ruling

Authorisation Number: 1011751747797

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Ruling

Subject: Travel expense

Question 1

Can you claim meal and incidental travel expenses without substantiation up to the reasonable amount when you are required to sleep away from home and are not paid a meal/travel allowance?

Answer

No.

Question 2

Where substantiation requirements are met, are you entitled to a deduction for meals, fuel and incidental expenses incurred while you are required to stay away from home for work purposes?

Answer

Yes.

Question 3

Are you entitled to a deduction for travel to and from the airport, and parking fees at the airport while you are working away from home?

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June 2011

The scheme commences on:

1 July 2010

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are an Australian resident.

You are a travelling sales representative.

You are required to travel throughout Australia providing presentations to potential clients.

You are provided with a work schedule that outlines where you will be travelling to a week before you travel.

You often travel to more than one client in a day.

You are required to carry brochures, books and presentation materials.

Your employer pays for your flights, accommodation, car hire and excess luggage.

You receive a fuel allowance. You pay all the fuel costs for your hire car.

You currently pay for your meals and incidentals.

You do not have receipts for all your meals and incidental expenses.

On occasions, you drive your vehicle to the airport and leave it in short term parking while you travel for work.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Income Tax Assessment Act 1997 Section 900-10

Income Tax Assessment Act 1997 Section 900-50

Income Tax Assessment Act 1997 Section 900-115

Income Tax Assessment Act 1997 Section 900-130

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Summary

As your travel expenses are incurred in earning your assessable income, the expenses are deductible where the substantiation requirements are met.

Detailed reasoning

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.

To satisfy the first limb of section 8-1 of the ITAA 1997, the loss or outgoing must be relevant and incidental to the operations or activities from which the assessable income is produced: Ronpibon Tin NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 8 ATD 431; (1949) 4 AITR 326. This principle is also expressed in terms of there having to be a sufficient nexus or connection between the outgoing and the production of assessable income.

What is involved is a process of identifying the essential character of the expenditure to determine whether it is in reality an outgoing incurred in gaining or producing assessable income.

A deduction is only allowable if an expense:

· meets the deductibility tests,

· is actually incurred, and

· satisfies the substantiation rules.

Travel expenses

Travel expenses include the costs of fares, accommodation, meals and incidentals. The cost of meals is generally considered to be a private or domestic expense and not deductible. An exception to this is where you are undertaking work-related travel and are required to stay away from home overnight. A deduction is generally allowable for the cost of these meals as the meal expense is sufficiently connected to the assessable income.

Substantiation

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.

Section 900-50 of the ITAA 1997 provides that you can deduct a travel allowance expense for travel within Australia without getting written evidence or keeping travel records if the Commissioner considers reasonable, the total of the outgoings you claim for travel covered by the allowance.

This exception to substantiation only applies if the employee is paid a bona fide travel allowance. The allowance must have an identifiable connection with the nature of the expense covered.

Taxation Ruling TR 2004/6 which deals with substantiation exceptions for reasonable travel and overtime meal allowance expenses states:

This ruling applies to individuals who incur work-related deductions for travel expenses or overtime meal expenses where these expenses are covered by an allowance paid by the person's employer. An employer includes a person who makes a withholding payment of a kind set out in subsection 900-12(3) of the Income Tax Assessment Act 1997 (ITAA 1997).

A bona fide travel allowance is an amount that could reasonably be expected to cover accommodation, or meals or expenses incidental to the travel. The meals and incidental amounts considered to be reasonable by the Commissioner for employees for the 2010-11 income year are covered by Taxation Determination TD 2010/19.

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.

What is considered to be a bona fide travel allowance depends on the facts of each case. 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.

The amounts set for meal and incidental expenses represent amounts that could reasonably be expected to be incurred for such expenses. A payment of $30 per day for meals and incidental expenses are considerably less than the Commissioner's reasonable amounts and would not be regarded as a bona fide allowance.

In your case, you are a travelling sales representative. Your employer pays your accommodation, airfares, car hire and excess luggage costs on your behalf. As you do not incur these expenses, no deduction is allowable.

Your employer does not pay you an allowance for meals and incidentals. As you are not in receipt of a bona fide travel allowance, you are not able to use the reasonable allowance amounts in Taxation Determination TD 2010/19 to claim a deduction for meals and incidentals as the substantiation exception under section 900-50 of the ITAA 1997 and Taxation Ruling 2004/6 do not apply. Therefore, you must keep a record of your meal and incidental expenditure in order to be able to claim a deduction for the expenses.

We acknowledge that it may be time consuming to keep your receipts, however where no receipts or written evidence are kept, no deduction is allowable. Receipts should be requested for all work related meals.

The documentary evidence required by the substantiation provisions under section 900-115 of the ITAA 1997 for expenses other than depreciation comprises a document from the supplier that sets out the:

         name or business name of the supplier

         amount of the expense (expressed in the currency in which incurred)

         nature of the goods or services

         date the expense was incurred, and

         date of the document.

In most cases, a receipt can be obtained for the cost of a meal. It is considered reasonable for an employee to obtain receipts for most meal expenses incurred. 

Section 900-125 of the ITAA 1997 states that if you have small expenses of $10 or less and your total expenses that are each $10 or less is $200 or less you can make a record, such as a diary, of the expenses instead of getting a document from the supplier. The record must contain the same information as required in section 900-115 of the ITAA 1997. 

It may not be reasonable for an employee to obtain receipts for some food and drink purchases, for example from vending machines or outlets that do not normally provide a receipt. These expenses are considered otherwise too hard to substantiate under section 900-130 of the ITAA 1997 and you can also make a record, such as a diary, of these expenses. These amounts do not count towards the $200 limit in section 900-125 of the ITAA 1997. The record must contain the same information as required in section 900-115 of the ITAA 1997. 

A meal expense may include the cost of the associated groceries purchased to make a meal.

Home to work travel

A deduction is generally not allowable for the cost of travel by an employee between home and their normal workplace as it is considered to be a private expense. The cost of travel between home and work is generally incurred to put the employee in a position to perform duties, rather than in the performance of those duties. 

In considering the deductibility of travel expenses a distinction is made between travel to work and travel on work. It is only if the duties of the job require a taxpayer to travel that the taxpayer's expenses can be deducted (Taylor v Provan 1975 AC 194).

A deduction is allowable for the cost of travel between home and work for an employee who is engaged in itinerant work.

Whether an employees work is itinerant is determined by the nature of the individuals duties and not their occupation or industry. Furthermore, itinerant work may be a permanent or temporary feature of an employees duties.

Taxation Ruling TR 95/34 discusses the characteristics of itinerancy. Indicators of itinerancy that are relevant in your case are examined below.

Travel a fundamental part of the employees work

In Federal Commissioner of Taxation v. Wiener 78 ATC 4006; (1978) 8 ATR 33 (Wieners case) a teacher that was required to regularly travel to four or five different schools in any one day had travel as a fundamental part of their work.

In your case you are a travelling sales representative. You often travel to more than one work location in a work day. That is, on most days you are required to travel in the performance of your work once you commence work at a location.

A web of work places

If a person performs work at a single site and then moves to other sites on a regular basis, it would be considered that a 'web' of work places exists. In Wiener's case, the taxpayer was required to attend four to five schools each day. This constituted a 'web' of work places.

As your employer posts you to a different interstate city for a period of approximately two weeks, and you may have to move to a different location within that two week period, it is considered that a web of work places exists.

Continual travel

Continual travel refers to the frequency with which an employee moves from one work site to another. It envisages that the employee regularly works at more than one work site before returning to his or her usual place of residence.

Given that you provide presentations during daytime and evening appointments you often attend a number of work locations each day, you are engaging in continual travel for work purposes.

Uncertainty of location

The element of uncertainty of location is generally another distinct characteristic of itinerant employment. Unlike an ordinary worker who makes the daily journey to his or her regular place of work, the itinerant worker often cannot be certain of the location of their work sites.

In your case, you are provided with a work schedule that outlines where you will be going a week before you travel, and the travel is random in nature. This can vary from week to week and can change even on the day it is meant to be carried out. We consider this to be some degree of uncertainty of location.

The weight of these factors indicates that your work is of an itinerant nature. This means that the travel expenses you incur in travelling to and from your home, as well as in between jobs, are deductible expenses.

Fuel expenses incurred for work related travel while away from home is an allowable deduction.

In your case, it is considered that airport parking fees incurred when travelling away from home for work is sufficiently connected with your income earning activities and are an allowable deduction. Please ensure you keep written evidence for your airport parking fees and fuel expenses.

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