Edited version of private advice

Authorisation Number: 1012614620274

Ruling

Subject: Meal expenses

Question

Are you entitled to a deduction for your meal expenses?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

1 July 2012

Relevant facts

You received a daily meal allowance whilst working at place A.

You worked for this employer at place A for several months.

The meal allowance is not shown separately on your payment summary but is included in the gross income amount on your payment summary.

Your family did not go with you to place A.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 15-2.

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 900-30

Reasons for decision

Assessable income

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.

Your meal allowance forms part of your assessable income.

Allowable deductions

Section 8-1 of the 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.

A number of significant court decisions have determined that for an expense to be an allowable deduction:

• it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense (Lunney v. FC of T; (1958) 100 CLR 478 (Lunneys case)), 

• there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income (Ronpibon Tin NL v. FC of T, (1949) 78 CLR 47), and

• it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income (Charles Moore Co (WA) Pty Ltd v. FC of T, (1956) 95 CLR 344; FC of T v. Hatchett, 71 ATC 4184).

A deduction is only allowable if an expense:

• is actually incurred,

• meets the deductibility tests, and

• satisfies the substantiation rules.

Expenditure on the daily necessities of life (for example, food and drink) is generally not deductible as it is not incurred in gaining or producing assessable income and is also considered to be private or domestic in nature.

Exceptions to this are where you are undertaking work-related travel and are required to stay away overnight or you work overtime and receive an overtime meal allowance.

In your case you did not receive an overtime meal allowance. Therefore we need to consider whether you were undertaking work related travel. You were employed at place A for several months during the 2012-13 financial year. During this time you received a daily meal allowance.

As stated above, the meal allowance received is assessable income. However, you are not automatically entitled to a deduction for expenses incurred in relation to an allowance. The expenses must meet the criteria for deductibility under section 8-1 of the ITAA 1997 as well as meet the substantiation requirements.

Before considering the substantiation requirements, it is necessary to determine whether your meal expenses are deductible.

Subsection 900-30(2) of the ITAA 1997 states that a travel allowance expense is a loss or outgoing you incur for travel that is covered by a travel allowance.

Subsection 900-30(3) of the ITAA 1997 states that a travel allowance is an allowance your employer pays or is to pay to you to cover losses or outgoings that you incur for travel away from your ordinary residence that you undertake in the course of your duties as an employee and that are losses or outgoings for accommodation or for food or drink or are incidental to the travel.

Taxation Ruling TR 2004/6 discusses the conditions when the substantiation exception for travel allowance expenses applies. For travel allowance expenses to be considered for the exception from substantiation, the employee must be paid a bona fide travel allowance. A travel allowance that is not paid or payable to cover specific work related travel is not considered a travel allowance for the purposes of the exception from substantiation. An amount for travel expenses that has been folded in as part of normal salary/wages is not considered to be an allowance. If a set amount is payable each fortnight regardless of the travel undertaken, the exception from substantiation does not apply.

In your case, you received an allowance for meal expenses while you were working at place A. Your employment contract went for several months. It is considered that place A was your normal place of work for this period. While it is acknowledged that your family did not travel with you to place A, it is not considered that your travel between your home and place A was work related travel. Rather it was private travel carried out to enable you to commence your employment duties. The distance of the travel does not alter the private nature of the travel. That is, you were not away from home overnight for work purposes, as place A was your new work place for the period of the contract.

As place A was your normal place of work, your meal expenses were not associated with any work related travel. You incurred expenses for meals while living and working at place A. These expenses are not incurred in gaining or producing your assessable income. Rather they are a private expense and no deduction is allowable.

That is, the meal allowance you received from your employer does not fall within the definition of a travel allowance under subsection 900-30(3) of the ITAA 1997. You are not entitled to a deduction for your meals as they are considered to be private in nature. It follows that the exception from the substantiation provisions contained in Division 900 of the ITAA 1997 have no application in your circumstances.

Please note, even if your employer showed the meal allowance separately on your payment summary, this does not change the above. The allowance is assessable, however no deduction is allowable for the meal expenses incurred.

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