Edited version of your written advice

Authorisation Number: 1051238070182

Date of advice: 15 June 2017

Ruling

Subject: Work Related Expenses - Deductions

Question 1

Are you entitled to a deduction for your food and meal expenses incurred at restaurants and other venues?

Answer

No

This ruling applies for the following period:

Period ended 30 June 2015

The scheme commences on:

1 July 2014

Relevant facts and circumstances

You worked for a company

Each year a new book is published.

The book is a marketing tool.

The book is sold.

At the beginning of each season staff create a list of businesses that are of strategic importance to increase the sale of the book. Identifying the best businesses to maximise sales of the book is a role of the staff.

Businesses are identified based on awards, reviews, recommendations for inclusion in the book in preparation for the next publication.

Staff are expected to work on attracting Target Merchants year round. Internally a list of 'Target Merchants’ are identified that could help the sales of the books if they were featured.

When employed the company advised staff that an amount is built into their salary to cover the costs they may potentially incur when performing the duties of their job.

Responsibilities of the staff include research and investigation into both new and currently listed businesses to screen the overall quality, popularity and suitability for inclusion in the book.

When vetting a business you would introduce yourselves and ask to meet the correct decision maker at the business.

You wouldn’t participate in a meal at all business visited. In some instances purchasing a meal facilitated a means to get in front of the owner/decision maker as a customer.

When you did purchase a meal you would purchase a variety of meals on occasions you were accompanied.

You would often have coffee, tea or soft drinks.

You would introduce yourself after the purchases unless a business is proving difficult to renew, in which case the owner or staff would usually recognise you.

You utilised the “guidelines” established by the company to classify business for inclusion in the book.

Business are rated on a number of criteria including but not limited to the pricing bracket of products.

You engaged with prospective and existing clients through business meetings held at their business premises.

The business owners provide logos, special event details website and social media channels details to staff to be utilised in the book.

Businesses were excluded from the book based on poor standard, poor treatment of members, too many businesses for one geographic location. Those with low redemption were replaced with business for a more popular business.

The books Digital Application, has no limitation on the number of business listings.

You receive an allowance for motor vehicle expenses.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 4-15

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 8-5

Income Tax Assessment Act 1997 Section 32-5

Income Tax Assessment Act 1997 Section 32-10

Income Tax Assessment Act 1997 Section 32- 30

Reasons for decision

Question 1

Summary

The food and drink expenses incurred are taken to have the characteristic of entertainment even if business discussions or transactions occurred. The consumption of food or drink is seen as a daily necessity of life being considered to be private or domestic in nature with insufficient connection to your income earning activities. Therefore no deduction is allowed.

Detailed reasoning

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, or a provision of the ITAA 1997 prevents it.

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. However, no deduction is allowable if a taxpayer is merely incurring accommodation and/or meal expenses close to their usual work location.

In your case you did not receive an overtime meal allowance and you were not away overnight. Your role was as a XXX to screen businesses for inclusion in the book and not as a critic. You utilise awards and established reputations to identify businesses for potential inclusion in preparation for the next publication with an aim to increase sales.

Income Tax Ruling IT 2198 Income tax: allowable deductions: expenditure voluntarily incurred by employee taxpayers states in the area of expenditure voluntarily incurred by employee taxpayers the approach which should be followed is that, a requirement upon an employee in the terms of employment to incur expenditure would establish a right to income tax deduction other than for capital, private or domestic expenditure.

Whilst it is acknowledged that you do partake in meals this does not occur at every business vetted. The purchasing of meals is utilised on occasions to provide an opportunity to access the main decision maker of the facility, which you not been able to be achieved via means such as telephone contact. The meals are not sufficiently connected to the earning of your assessable income. Rather seen as a daily necessity of life being considered to be a private expense and no deduction is allowable under section 8-1 of the ITAA 1997.

Also relevant in your circumstances is Division 32 of the ITAA 1997.

Section 32-5 of the ITAA 1997 provides a general prohibition on the deductibility of entertainment expenses under section 8-1 of the ITAA 1997. Entertainment is defined in section 32-10 of the ITAA 1997 and includes entertainment by way of food, drink or recreation. As outlined in subsection 32-10(2) of the ITAA 1997, you are taken to provide entertainment even if business discussions or transactions occur. That is, business lunches are entertainment for Division 32 purposes. Exemptions to the classification of entertainment are activities such as meals on business travel overnight, theatre attendance by a critic and a restaurant meal of a food writer.

Section 32-5 of the ITAA 1997 does not stop you deducting certain losses or outgoings incurred by employers such as providing food or drink to your employees in an in-house dining facility. However this or the other exceptions outlined in section 32-30 of the ITAA 1997 do not apply to you.

Income Tax Ruling IT 2675 Income tax and fringe benefits tax: entertainment - morning and afternoon teas; light meals; and in-house dining facilities states that the provision of morning teas or light meals on a working day, either on the employer’s premises or at a worksite of the employer, is not considered entertainment. However, your employer is not providing meals on the employer’s premises or at a worksite of the employer. Therefore this exception does not apply.

Food or drink provided on the employer's business premises or at the usual place of work of the employee is less likely to have the character of entertainment. However, food or drink provided in a café or coffee shop is more likely to have the character of entertainment. This is because the provision of the food or drink is less likely to have a work-related purpose. (TR 97/17)

The other exceptions outlined in Division 32 of the ITAA 1997 also do not apply in your circumstances.

In your position, although you may consume lunch or dinner during your work, it is considered that the food and drink amounts to entertainment for Division 32 of the ITAA 1997 purposes. Furthermore the expenses are private in nature and no deduction is allowed under section 8-1 of the ITAA 1997.

We acknowledge the expenditure had a causal connection with the earning of income however the expenditure on your meals is not deductible. The expenditure is inherently of a private or domestic nature and not incurred in gaining or producing your assessable income as a Business XXX. Therefore no deduction is allowable under section 8-1 of the ITAA 1997 for your meal expenses. Your assessable income is not impacted by the application of section 4-15 of the ITAA 1997 and section 8-5 of the ITAA 1997 as a deduction does not apply.

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