Edited version of private ruling

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Ruling

Subject: Overtime meal allowance

Question and answer:

Are you entitled to a deduction for meal expenses incurred where you are in receipt of an overtime meal allowance?

Yes.

This ruling applies for the following period:

Year ended 30 June 2010

The scheme commenced on:

1 July 2009

Relevant facts:

You work overtime on a daily basis.

You receive an overtime meal allowance.

You buy a meal each afternoon.

The overtime meal allowance is paid under a workplace agreement.

The overtime meal allowance is not listed separately on your payment summary, not included in the gross payment on your payment summary and not folded in as part of your normal salary and wages.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 32-50

Income Tax Assessment Act 1997 Section 900-30

Income Tax Assessment Act 1997 Section 900-60

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.

The cost of meals is generally considered to be a private or domestic expense and not deductible under section 8-1 of the ITAA 1997. However, expenses incurred for meals in connection with overtime worked are deductible if you receive an allowance under an industrial instrument to buy those meals (section 32-50 of the ITAA 1997).

Subsection 900-30(4) of the ITAA 1997 states that overtime meal allowance expenses are work expenses if they are incurred for food or drink and are covered by a meal allowance. A meal allowance is an amount that the employer pays to an employee to enable the employee to purchase food or drink.

To be entitled to claim a deduction for overtime meal expenses, in addition to including the allowance as assessable income, the following requirements must be met:

· the expense must be actually incurred

· the meal allowance must be paid to cover the cost of food or drink in connection with the overtime worked, and

· the overtime meal allowance must be paid or be payable under a law of the Commonwealth or of a State or Territory, or under an award, order, determination or industrial agreement in force under such a law.

In your case, the expense is actually incurred because you do buy a meal each afternoon for consumption at work. The meal allowance is paid to cover the cost of this meal. The overtime meal allowance is paid under an industrial agreement.

Therefore, you are entitled to claim a deduction for the overtime meal expense if you include the overtime meal allowance in your assessable income.

Substantiation

As a general rule, written evidence is required to substantiate any expense you wish to claim as a deduction (for example, receipts or invoices of the expense).

Section 900-60 of the ITAA 1997 states an exception to this rule applies if you receive an overtime meal allowance to enable you to buy food and drink during your overtime, the allowance is paid under an industrial instrument and the Commissioner considers the total claim for the overtime meal expenses is reasonable.

Consequently, where these circumstances are met, the total cost of meals is deductible without the need for written evidence. However, you are still required to be able to show how you calculated your expenses using a reasonable basis. For example, you state you usually purchase A food and B drink at a cost of $C. This is multiplied by the number of times you purchase meals during overtime and when you are paid the allowance.

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.

Taxation Determination TD 2009/15 Income Tax: what are the reasonable travel and overtime meal allowance expense amounts for 2009-10 income year? publishes the reasonable allowance expenses for the 2009-2010 income year and states the reasonable amount for overtime meal expenses to be $24.95. This is the amount the Commissioner considers reasonable for the purposes of exemption from substantiation.

In your case, you can claim a deduction for the overtime meal expenses actually incurred up to the amount the Commissioner considers reasonable without written evidence to substantiate.

In conclusion, if you include your overtime meal allowance in your assessable income, you are entitled to claim a deduction for the overtime meal expenses you have incurred up to the Commissioner's reasonable amount without substantiation.