1013139418604 | Legal database

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Edited version of your written advice

Authorisation Number: 1013139418604

Date of advice: 20 December 2016

Ruling

Subject: Work related travel expenses

Question 1

Are you entitled to a deduction for travel expenses up to the reasonable amount without providing substantiation, where you have received a 'living away from home' allowance from your employer?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2015

Year ended 30 June 2016

The scheme commences on:

1 July 2014

Relevant facts and circumstances

You are employed as a pilot.

Your normal place of residency is in Australia.

As part of your employment you are required to work overseas.

Your flight and accommodation is paid by your employer.

You receive a living away from home allowance from your employer to cover all meals and incidentals.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1,

Fringe Benefits Tax Assessment Act 1986 sections 30 and 60, and

Income Tax Assessment Act 1936 section 23L.

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.

As a general rule, meals and incidental expenses while working away from home are not allowed as a deduction. The place where a taxpayer stays whilst away from their home is considered to be their usual place of residence for that period. These costs are essentially living expenses of a private or domestic nature. The fact that income cannot be earned unless certain expenses are necessarily incurred is not an indication of deductibility. However, these expenses will be deductible if they are incurred while travelling in the performance of duties of employment.

In your case, the allowance you received is treated under the Fringe Benefit Tax regime by your employer.

A Fringe Benefit is defined in subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986) as an allowance, in whole or part, that is seen as the compensation provided to the employee for additional expenses or other disadvantages the employee is subject to by reason that the employee is required to live away from their usual place of residence in order to perform the duties of employment.

Taxation Ruling MT 2030 Fringe benefits tax: living-away-from-home allowance benefits distinguish the difference between a living-away-from-home allowance (LAFHA) and a travelling allowance. A LAFHA is paid where the employee has moved and taken up temporary residence away from their usual place of residence in order to carry out their work duties at the new workplace. A travelling allowance, on the other hand, is paid because the employee is travelling in the course of performing his or her job.

A LAFHA is subject to tax in the hands of your employer on the value of the fringe benefit provided to you as an employee (section 66 of the FBTAA 1986). The allowance is exempt income in your hands (subsection 23L(1) of the Income Tax Assessment Act 1936 (ITAA 1936)) and as such does not form part of your assessable income for tax purposes. Consequently, any amount you incurred in relation to the LAFHA received is not deductible as it is related to the earning of exempt income (paragraph 18 of Taxation Ruling TR 95/22).

Additionally, various court decisions have concluded that food expenses incurred while away from home are essentially 'living expenses' of a private or domestic nature and therefore not deductible (FC of T v. Cooper 91 ATC 4396; (1991) 21 ATR 1616; FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466). The place where you stay while away from home is considered your usual place of residence for that period.

Therefore, you are not entitled to a deduction for your meals and incidental expenses while working away from home.

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