Edited version of your private ruling

Authorisation Number: 1012556113109

Ruling

Subject: Allowance and accommodation and meal deduction

Question 1

Is the allowance you received included in your assessable income as a travel allowance?

Answer

Yes.

Question 2

Are you entitled to a deduction for travel expenses incurred during the periods of employment when you are receiving the travel allowance?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

1 July 2012

Relevant facts and circumstances

You were on call and offered short periods of employment in varying locations until the specific job was completed. You were not employed on a full-time basis for the full year. You began your duties when you arrived at the job site.

You received an allowance for each period of employment as accommodation and meal expenses were at the employee's expense.

For the year ended 30 June 2013 you received an allowance for four periods during the financial year.

The nature of employment and periods of engagement are on a job completion basis and your time away was not fixed and always for a short period. You maintained your usual place of residence where your family resided and your family did not at any time accompany you at any of the above job locations.

The allowance is paid at a daily rate of $100 per day whilst you are at the work location. No Fringe Benefits Tax living away from home declaration was completed for any of the periods that the allowance was paid.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 15-2

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Allowance

Section 15-2 of the Income Tax Assessment Act 1997 (ITAA 1997) states that  your assessable income includes the value to you of all allowances, gratuities, compensation, benefits, bonuses and premiums provided to you in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by you.

Section 23L of the Income Tax Assessment Act 1936 states that income derived by a taxpayer by way of provision of a fringe benefit within the meaning of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) is not assessable income and is not exempt income of the taxpayer.

Miscellaneous Taxation Ruling MT 2030 provides guidance in relation to the distinction between a living away from home allowance and a travel allowance. While the expenses that they are intended to compensate for may be similar - meals and accommodation - the circumstances in which the allowances are paid are essentially different.

A living away from home allowance is paid where an employee has moved and taken up temporary residence away from his or her usual place of residence so as to be able to carry out employment duties for a time at the new (but temporary) workplace. There is a change of job location and an actual change of residence to a place at or near that location.

Therefore, for an allowance to be considered and accepted as a living away from home allowance, the employer must determine whether the employee is bona fide living away from home during the period of his employment because of the nature of their duties.

If an employer determines that an employee is required to live away from home to carry out his employment duties and the employee does not have a transitory lifestyle referred to in MT 2030, then any payments or reimbursements by way of a living away from home allowance will be subject to taxation obligations under the FBT legislation. Such FBT obligations remain the responsibility of the employer and all necessary records must be kept.

A travel allowance, on the other hand, is paid because the employee is travelling in the course of performing his or her job. Travel allowances are often paid for comparatively short periods. Where the period away does not exceed 21 days the allowance will generally be treated as a travel allowance.

In your case, you work for short periods before returning home, the allowance is not subject to fringe benefits tax and you have not provided your employer with a declaration relating to living away from home.

Therefore, as the allowance is not a fringe benefit, it is assessable under section 15-2 of the ITAA 1997.

Deductibility

Section 8-1 of the 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.

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

Meal and incidental 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 and incidental 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.

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.

To be a bona fide travel allowance the amount paid must be an amount that could reasonably be expected to cover accommodation, or meals or expenses incidental to the travel.

The allowance you receive is not considered to be an amount that could reasonably be expected to cover accommodation and meals. The allowance is therefore, not considered to be a bona fide travel allowance. Consequently, you cannot rely on the relief from substantiation provisions in Section 900-50 of the ITAA 1997.

In your case, if you wish to claim a deduction for accommodation and meals, you must be able to substantiate the expenses.

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