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Edited version of your written advice

Authorisation Number: 1012795471346

Ruling

Subject: Meal expenses

Question 1

Are you entitled to a deduction for meal expenses up to the Commissioner's reasonable allowance amounts, without substantiation?

Answer

No.

Question 2

Where the allowance is declared as assessable income, are you entitled to a deduction for meal expenses totalling $xx for the 2013-14 financial year?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2014

The scheme commenced on

1 July 2013

Relevant facts

You are an employee.

You receive an allowance per night when you are away from home for work.

The allowance is based on $X per night. The allowance is paid to compensate you for the inconvenience of not being able to return home at night.

You were away from home several nights during the 2013-14 financial year. You incur expenses for meals when travelling away from home.

You withdraw cash amounts from various ATM and eftpos facilities during your trips and you use cash to purchase your meals.

You have documentation to show that you spend $x per meal when away 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 900-30

Income Tax Assessment Act 1997 Section 900-50

Income Tax Assessment Act 1997 Section 900-115

Income Tax Assessment Act 1997 Subdivision 900-H.

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.

A deduction is only allowable if an expense:

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.

An exception to this is where you are undertaking work-related travel and are required to stay away overnight.

In your case you are away from home overnight for work and receive an allowance on such occasions. Such an allowance is assessable income. However, an employee is 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.

The cost of meals incurred in the course of work-related travel away from home may be deductible. However, section 900-10 of the ITAA 1997 requires you to substantiate the expenses.

Division 900 of the ITAA 1997 sets out the substantiation requirements when claiming expenses but also provides some exceptions available for certain work related expenses.

Subdivision 900-B of the ITAA 1997 provides an exception from the substantiation requirements for domestic travel allowance expenses.

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.

As outlined in Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses, the exception from substantiation for travel allowance expenses provided by section 900-50 of the ITAA 1997 will only apply where all three of the following criteria are met:

Therefore, to establish whether the exception from substantiation of your meal expenses applies in your circumstances, we need to consider whether your allowance is regarded as a bona fide travel allowance.

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.

In your case, you were paid an allowance when you were away from home overnight for work. The amount is paid to compensate you for the inconvenience of not being able to return home at night. The allowance was not paid to cover your meal expenses. Therefore your allowance does fall within the definition of a travel allowance under subsection 900-30(3) of the ITAA 1997. 

As your allowance is not a travel allowance, you are not entitled to rely on the exception from the substantiation provisions under section 900-50 of the ITAA 1997 in regard to your meal expenses. It follows that the reasonable amounts outlined in Taxation Determination TD 2013/16 have no application in your circumstances.

To be entitled to claim a deduction for your work related meal expenses, in addition to including the allowance as assessable income, the expense must be actually incurred and you must have the appropriate written evidence.

Written evidence is outlined in section 900-115 of the ITAA 1997 and states that you must get a document from the supplier showing the name of the supplier, the amount of the expenses, the nature of the goods or services and the day the expense was incurred.

In your case, you have documentation to show that you have incurred $x per meal when you are away from work.

Although you do not have the required written evidence, the Commissioner is satisfied that you incurred the meal expenses and that you are entitled to deduction for $x per meal. Therefore the Commissioner will grant relief from the effects of failing to substantiate (subdivision 900-H of the ITAA 1997).

Your allowable deduction for your meal expenses for the 2013-14 financial year is $xx.

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