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Edited version of your private ruling
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Ruling
Subject: Travel allowance substantiation
Question
Are you entitled to claim a deduction up to the Commissioner's reasonable travel amounts, without written evidence, where you include the travel allowance as assessable income and the expenses are actually incurred?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2009
Year ended 30 June 2010
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
The scheme commences on:
1 July 2008
Relevant facts and circumstances
You are an employee.
You are an Australian resident for tax purposes.
You are paid a travel allowance by your employer for the nights you are away from home.
You receive an allowance at a rate set by your employer.
The allowance is paid in cash when you check into the hotel.
The allowance is not shown on your PAYG certificate.
You are able to obtain full details of all payments.
The travel allowance you receive is less than the Commissioner's reasonable amounts.
You have details from your logbook and roster which is effectively your travel diary.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Section 900-55
Income Tax Assessment Act 1997 Section 900-65
Income Tax Assessment Act 1997 Section 900-150
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.
Section 900-30 of the ITAA 1997 states that travel allowance expenses are work expenses if they are incurred for travel, food or drink and are covered by a travel allowance. A travel allowance is an amount that an employer pays you to cover specific work-related travel expenses you incur for accommodation or food or drink or incidental expenses when travelling in the course of your duties as an employee.
As a general rule, written evidence is required to substantiate any expense you wish to claim as a deduction (for example, receipts or invoices of the expense).
Section 900-50 of the ITAA 1997 states an exception to this rule applies if you receive a bona fide travel allowance to cover accommodation or food and drink and the expenses do not exceed amounts the Commissioner deems reasonable.
Taxation Ruling TR 2004/6 explains that an expense must be actually incurred as required by section 8-1 of the ITAA 1997, before a claim can be made. You cannot automatically claim a deduction just because you receive an allowance.
TR 2004/6 states at paragraph 12 that unless the following exception applies, all allowances must be shown as assessable income in the employee's tax return. However where:
· the allowance received is a bona fide travel allowance
· the allowance received does not exceed the reasonable amount; and
· the allowance has been fully expended on deductible expenses,
· the allowance received is not required to be shown as assessable income in the employee's tax return. Where the allowance is not required to be shown as assessable income in an employee's tax return, and is not shown, a deduction for the expense cannot be claimed in the tax return.
In your case it is accepted you received a bona fide travel allowance to cover meals and incidentals while working overseas and the allowance did not exceed the reasonable amount.
Therefore, you are entitled to claim a deduction up to the Commissioner's reasonable travel amount, where you include the travel allowance as assessable income and the expenses are actually incurred. You may still be required to show the basis for determining the amount of your claim and that the expense was actually incurred for work related purposes.
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