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Date of advice: 25 October 2017

Ruling

Subject: Work related expenses

Question 1

Are you entitled to claim a deduction for the meal expenses you have incurred due to your overseas travel up to the reasonable amount listed in Taxation Determination 2016/13?

Answer

Yes, provided your meal allowance is included in your assessable income.

This ruling applies for the following period:

Year ending 30 June 2017

The scheme commences on:

1 July 2016

Relevant facts and circumstances

You are employed.

As part of your duties you are required to travel overseas

You travel for a maximum of four days.

You receive an allowance per day to cover the cost of meals and incidentals.

This allowance is not reported on your payment summary.

You expend more than the allocated per diem amount, however it is under the reasonable allowance amounts for meals and incidentals.

Relevant legislative provisions

Income Tax Assessment Act Section 8-1

Income Tax Assessment Act Section 900-90

Reasons for decision

Meal expenses

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income, except to the extent that they are outgoings of a private or domestic nature.

Accommodation and meal expenses are living expenses and as such are intrinsically private or domestic in nature. However, these expenses may be considered to be work related where they are incurred while an employee is travelling on work.

Taxation Ruling 95/18 details work related deductions for truck drivers. Paragraph 158 states a number of cases considered by the Courts and Tribunals where deductions for travel expenses were allowed where the taxpayer was required to sleep away from home. In Case E34 5 TBRD (NS) 205; 4 CTBR (NS) Case 99 , J L Burke (Chairman) stated (TBRD at 205; CTBR at 587:

'...where the taxpayer maintained a domestic establishment and where her employment caused her to move away from that establishment for periods of indefinite duration, I am prepared to find that expenses incurred on hotel accommodation and meals whilst the taxpayer was absent from her headquarters, if I may use the term, were not of a private or domestic nature.'

The conclusion reached in that case was, because the income-earning activities of the position required the taxpayer to sleep away from home, the expenses incurred on accommodation and meals were an allowable deduction.

In your situation it is considered that the additional meal expenses you have incurred are work related expenses, as they have been incurred during the course of performing your work duties.

Accordingly, the expenditure incurred by you on the trip would be allowed as an income tax deduction under section 8-1 of the ITAA 1997. However, the meal allowance you receive from your employer should be included in your assessable income.

Reasonable allowance amounts

The Commissioner of Taxation publishes a Taxation Ruling annually that indicates amounts considered reasonable in relation to the following expenses:

(a) overtime meal expenses;

(b) domestic travel expenses; and

(c) overseas travel expenses.

Allowances received in relation to these expenses are fully assessable. If an allowance is received and the amount of the claim for expenses incurred is no more than the reasonable amount, substantiation is not required. If the deduction claimed is more than the reasonable amount, the whole claim must be substantiated, not just the excess over the reasonable amount.

Taxation Determination 2016/13 outlines the reasonable travel and overtime meal allowance expense amounts for the 2016-17 income year.

If you travel for six or more nights in a row, you may need to keep a travel diary in which you record the dates, places, times and duration of your activities and travel.

In your case you have a received a travel allowance and are not travelling for over six nights. You advise the expenses you will incur will not exceed the reasonable allowance amounts for meals and incidentals.

Substantiation rules

Taxation Ruling 2004/6 discusses the substantiation exception for reasonable travel and overtime meal allowance expenses.

Paragraph 15 of TR 2004/6 outlines:

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. What counts as evidence for a claim subject to the substantiation exception will vary according to individual circumstances and the nature of the expense.

Paragraph 30 of TR 2004/6 states:

The exception from substantiation for work-related expenses covered by an overseas travel allowance applies only to expenses for food, drink and incidentals. The exception does not apply to accommodation costs. Where an overseas travel allowance is received, the amount claimed for work-related expenses is considered reasonable if it does not exceed the relevant food or drink or incidentals component that is covered by an overseas travel allowance determined by the Commissioner.

Please note if the amount for travel expenses has been folded-in as part of normal salary/wages, for example under a workplace agreement, it is not considered to be an allowance. If an allowance has been folded-in as part of normal salary/wages the exception from substantiation contained in this ruling does not apply. The necessary written evidence must be kept to support claims for deductible expenses incurred.

The written evidence that must be maintained in respect of work related travel expenses can be a receipt, invoice or similar document obtained at the time the expense was incurred or as soon as reasonably practicable thereafter.

Section 900-90 of the ITAA 1997 provides:

• you must retain your receipts, written documentation for a period of five years;

• the five years starts on the due day for lodging your income tax return for the income year;

• if you lodge your return later, the five years start from on the day you lodge it

• if you do not retain the receipts and/or written documentation for this period, you cannot deduct the expense.

If this is the case and if you wish to claim the above expenses, you must retain your receipts and/or written documentation for a period of five years from date of lodgement of your income tax return.

However where the allowance is not shown on the employee’s payment summary, the allowance received is not required to be shown as assessable income in the employee’s tax return. Where the allowance is not required to be shown as assessable income in the employee’s tax return, and is not shown, a deduction for the expenses cannot be claimed in the tax return.

If you wish to claim the expenses you must declare the allowance amount as assessable income in your income tax return.

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