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Edited version of your written advice
Authorisation Number: 1013092710587
Date of advice: 16 September 2016
Ruling
Subject: Work related travel expenses
Question
Are you entitled to the exception from substantiation when claiming a deduction for work related travel expenses?
Answer
No
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You worked away from home for part of the relevant financial year.
During this period, your employer paid for your accommodation. You were required to pay for your meals and incidentals, and for this your employer paid you a travel allowance of $X per week.
Your allowance is shown separately on your payment summary.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Subdivision 900-B
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 to the extent to which they are of a capital, private or domestic nature.
Where a taxpayer is paid a bona fide travel allowance to cover the cost of meals, accommodation and incidentals while away from home, a deduction for expenses relating to these outgoings may be allowable without the need to comply with the substantiation requirements if the expenditure claimed is reasonable.
The receipt of a travel allowance does not automatically entitle a taxpayer to a deduction for travel expenses. Nor can a claim be automatically made up to the amount of the travel allowance received unless travel expenses of at least that amount have been incurred.
Taxation ruling TR 2004/6 addresses the substantiation exception for reasonable travel and overtime meal allowance expenses. Paragraphs 8 and 9 of TR 2004/6 state the following:
8. Under Subdivision 900-B of the ITAA 1997, a deduction is not allowable for a work expense, including a meal allowance expense or travel allowance expense, unless the expense qualifies as a deduction under a provision of the Act and written evidence of the expense has been obtained and retained by the employee taxpayer.
9. Subdivision 900-B also provides that the substantiation requirement to obtain written evidence does not apply to claims by employee taxpayers for expenses covered by:
• an overtime meal allowance paid under an industrial instrument; or
• a domestic travel allowance or overseas travel allowance, whether or not the allowance is paid under an industrial instrument,
if the amount of the claim for losses or outgoings incurred does not exceed the reasonable amounts.
Paragraphs 60 to 62 of TR 2004/6 discuss what constitutes a bona fide travel allowance. In order 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.
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 purposes of the exception from substantiation.
What is a bona fide amount to cover accommodation or meals or expenses incidental to the travel depends on the facts of each case, including the arrangements for payment of the allowance.
Paragraph 15 of TR 2004/6 further states that if a taxpayer relies on the exception from substantiation, they may still be required to show the basis for determining the amount of their claim, that the expense was actually incurred, and that it was for work-related purposes.
In your case, you have not indicated the amount of travel expenses that you actually incurred, merely used the Commissioner's reasonable allowance amount as the basis of your claim. The Commissioner's reasonable allowance amount is not designed to be the basis for calculation of a travel expense claim, as you can only claim a deduction for expenses you have actually incurred. The reasonable allowance amount is merely the threshold below which you do not have to provide full substantiation of your expenses if you have received a travel allowance.
Furthermore, it is not considered that you have received a bona fide travel allowance. Your employer states that when you stay away from home you receive a meal allowance of $X per week, or $Y per work day. This is not considered to be an amount that would reasonably cover three meals a day plus incidentals, particularly considering the Commissioner's reasonable amount for the 2015-16 income year for three meals plus incidentals is $114.15.
As you have not received a bona fide travel allowance, you are not eligible for the substantiation exception as detailed in TR 2004/6.
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