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Edited version of private ruling
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Ruling
Subject: Sleepover allowance
Question 1
Are you entitled to a deduction for expenses incurred whilst sleeping over at your place of employment?
Answer
No.
This ruling applies for the following periods:
Year ended 30 June 2006
Year ended 30 June 2007
Year ended 30 June 2008
Year ended 30 June 2009
The scheme commences on:
1 July 2005
Relevant facts and circumstances
You are a residential support worker and are required to sleep overnight at your place of employment for a number of consecutive nights in each fortnight.
You are required to provide your own meals, bedding, linen, doona, blankets, pillows and toiletries.
You receive a sleep over allowance which is detailed in your pay slips but not detailed in your payment summary.
The allowance does not exceed the reasonable daily allowances.
Relevant legislative provisions
Income Tax Assessment Act 1997 8-1
Income tax Assessment Act 1997 section 15-2
Fringe Benefits Tax Assessment Act 1986 section 136
Fringe Benefits Tax Assessment Act 1986 subsection 30(1)
Reasons for decision
Summary
An expense incurred against the sleepover allowance received is not deductible.
Detailed reasoning
A sleepover allowance is paid as compensation for the additional expenses and inconvenience the taxpayer suffers as a result of spending the night at their place of employment. A sleepover allowance is a payment in the nature of salary and wages and is included in assessable income under section 15-2 of the Income Tax Assessable Act 1997 (ITAA 1997).
A sleepover allowance is not a living-away-from-home allowance because the recipient is not considered to be living away from their usual place of residence within the meaning of subsection 30(1) of the Fringe Benefit Tax Assessment Act 1986. A person will not be regarded as living away from home if their work location does not change or if they merely spend a night, or a few nights, away from their usual place of residence because of work. Nor can the sleepover allowance be considered to be a travel allowance as the duties performed as part of the taxpayer's employment continued to be conducted at the same site.
Section 8-1 of the 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.
The payment of an allowance does not automatically entitle the taxpayer to a deduction. The expense must be incurred in the course of producing assessable income (Amalgamated Zinc (De Bavay's) Ltd v. FCT (1935) 54 CLR 295; (1935) 3 ATD 288; [1936] ALR 67).
The meaning of 'incurred in gaining or producing assessable income' was considered in Ronpibon Tin NL Tong Kah Compound v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 56 ALR 785; (1949) 8 ATD 431. The High Court stated that:
For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words 'incurred in gaining or producing the assessable income' mean in the course of producing such income.
Expenditure on the daily necessities of life (for example, food and drink) are generally not deductible (unless the outgoing gives the expenditure the essential character of a working expense) as it is not incurred in gaining or producing assessable income and is also private or domestic in nature.
You are required to sleep over at your place of employment for a number of nights and to provide for your own meals and incidentals. You are paid a sleepover allowance which is included in your fortnightly payslips but not noted as a separate allowance in your payment summary.
In your case, the expenditure incurred on meals and incidentals is not incurred in gaining or producing assessable income and is private or domestic in nature. The expenses are therefore not deductible under section 8-1 of the ITAA 1997 against the sleepover allowance received.