Edited version of private ruling

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Ruling

Subject: Deductibility of meal expenses

Question and answer:

Are you entitled to claim a deduction up to the Commissioner's reasonable amount for meal expenses incurred where you are in receipt of a victualling allowance?

Yes.

This ruling applies for the following periods:

Year ended 30 June 2009

Year ended 30 June 2010

The scheme commenced on:

1 July 2008

Relevant facts:

You worked as a skipper/deckhand on boats.

You worked on a fly in/fly out basis.

You were sometimes required to spend a number of days straight on the boat when moving the boat between ports.

You received a victualling allowance when working on a boat on which no meals were provided.

The victualling allowance is disclosed separately on your annual payment summaries.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Subdivision 900-B

Income Tax Assessment Act 1997 Section 900-30

Income Tax Assessment Act 1997 Section 900-50

Income Tax Assessment Act 1997 Section 900-90

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.

A "travel allowance" is defined in subsection 900-30(3) of the ITAA 1997 as an allowance paid by an employer to cover costs incurred by an employee who is required to travel away from their ordinary residence in the course of their duties and who incurs costs for accommodation, food or drink, or expenses that are incidental to the travel.

A "travel expense" is defined in section 900-95 of the ITAA 1997 as a loss or outgoing you incur for travel that involves you being away from your ordinary residence for at least one night. The travel may be within or outside Australia and if the expense is incurred in earning your salary or wages, it is dealt with as a work expense. A travel expense might also include costs of accommodation, food and drink, or expenses incidental to work-related travel.

The cost of meals is generally a non-deductible private expense and not deductible under the provisions of section 8-1 of the ITAA 1997. When the expense is incurred by an employee required to travel overnight away from their home in the course of their duties, the cost of food and meals may be considered a legitimate work expense. If the employee who has incurred the expense is paid a travel allowance by their employer, the expense is considered to be a travel allowance expense. If no allowance is paid, the expense is considered to be a travel expense.

The receipt of a travel allowance does not automatically mean that a deduction for a travel allowance expense will be allowed. A deduction will only be allowed if an expense:

· is actually incurred

· meets the deductibility tests in section 8-1 of the ITAA 1997, and

· satisfies the substantiation rules.

The general rule under Subdivision 900-B of the ITAA 1997 is that written evidence is required to substantiate any expenses you wish to claim as a deduction.

Section 900-50 of the ITAA 1997 contains an exception from the general requirement to keep written evidence of expenses if you receive a travel allowance for domestic travel within Australia to cover accommodation or food and drink and the expenses do not exceed the amounts the Commissioner deems reasonable. Taxation Determination TD 2009/15 defines the amounts that the Commissioner considers are reasonable for the year ended 30 June 2010. Taxation Determination TD 2008/18 defines reasonable amounts for the year ended 30 June 2009.

Taxation Ruling TR 2004/6 specifies that for the reasonable allowance exception to apply, the amount paid to an employee must qualify as a travel allowance. TR 2004/6 sets out the conditions that must be met for an allowance to qualify as a travel allowance. To summarise, these conditions include:

· the employee must sleep away from home (paragraph 53)

· for domestic travel, the amount must be paid to cover the cost of accommodation, food, drink or expenses incidental to the travel (paragraphs 54-55)

· the amount paid must be paid to cover specific journeys undertaken for work-related travel (paragraphs 56-58)

· the amount must be paid as an allowance (paragraph 59), and

· the amount paid must be a bona fide travel allowance, that is, an amount that could reasonably be expected to cover accommodation, meals or expenses incidental to the travel (paragraphs 60-62).

The exception from substantiation requirements for reasonable travel allowance expenses does not apply if one or more of these conditions are not met.

If the deduction claimed is more than the reasonable amount, the whole claim must be substantiated, not just the excess over the reasonable amount. 

The reasonable allowance amounts can only be claimed where you have actually incurred at least that amount for meals. If the expense you incurred is less than the reasonable amount, you can claim only the actual amount incurred.

TR 2004/6 specifies that for an amount paid to an employee to qualify as an allowance, and thus be excluded from substantiation requirements, it must be separately disclosed as an allowance on the annual payment summary and not folded-in as part of normal salary or wages.

Application to your circumstances

In your case, you received a victualling allowance to cover the cost of meals whilst working away from home on a boat. This allowance was separately disclosed on your annual payment summary.

This allowance qualifies as a travel allowance for the purposes of the exception from substantiation for reasonable travel expenses because your case meets the requirements set out in TR 2004/6 as follows:

· You were required to sleep away from home whilst working

· You were travelling domestically

· You were provided with the allowance to cover the cost of buying food that you then consumed whilst working on the boat where no meals were provided

· The allowance was paid to cover the specific periods when you were working on the boat

· The amount was paid as an allowance and was separately disclosed on both your pay-slips and annual payment summary, and

· The allowance that was paid in the income year ended 30 June 2010 was an amount that could have been reasonably expected to cover your daily food expenses.

You are entitled to claim a deduction without obtaining substantiation for expenditure you incurred on meals not exceeding the amount the Commissioner considers reasonable.