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Ruling

Subject: Deduction-meals

Question 1

Are you entitled to a deduction for meal expenses while you are employed offshore?

Answer: No.

Question 2

Are you entitled to claim a deduction for meals using the reasonable allowance amounts?

Answer: No.

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commenced on:

1 July 2010

Relevant facts

You are employed with a company engaged in offshore projects.

You are not paid a travel allowance by your employer.

You are deployed overseas for varying periods.

Your employer paid for your accommodation while you worked offshore.

You provide for your own meals while working offshore.

You maintain a family home while working offshore.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1.

Reasons for decision

Meals expenses

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.

Various court decisions have concluded that, generally, accommodation and food expenses incurred while away from home are essentially 'living expenses' of a private or domestic nature and therefore not deductible (Federal Commissioner of Taxation v. Cooper 91 ATC 4396; (1991) 21 ATR 1616; Federal Commissioner of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466).

As a general rule, where a taxpayer is away from home overnight in connection with a work related activity, meal expenses incurred are deductible. However, a place where the taxpayer stays whilst away from home is considered their usual place of residence for that period.

Generally, the payment of a travel allowance indicates that an employer recognises that an employee will incur an extra expense not normally incurred by that employee. The purpose of the payment of an allowance must be considered in determining the deductibility of the travel expense. The critical fact being that the taxpayer must be travelling for work purposes. For example, an office worker attends an interstate conference or a salesman travelling 'on the road'.

In your case, you travelled offshore to undertake your employment duties. You lived in accommodation provided by your employer. You are not considered to be travelling in the course of undertaking employment duties. Rather the place where you engage in your employment activities for the period of time you are offshore is your regular place of work and a deduction for meal expenses under section 8-1 of the ITAA 1997 is not allowable as the expenses are private in nature.

Furthermore, you have made reference to Taxation Determination TD 2010/19 which provides the reasonable allowance amounts for the 2010-11 income year for each component of accommodation, food and drink and incidental expenses. This Determination should be read in conjunction with Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses which explains the substantiation exception and the way in which these expenses are able to be claimed.

As noted at paragraph three in TD 2010/19 in relation to the key points from Taxation Ruling TR 2004/6 about claiming travel allowance expenses and overtime meal allowance expenses it states:

Allowance must be paid - The substantiation exception only applies if the employee is paid an overtime meal allowance or a travel allowance. The allowance must have an identifiable connection with the nature of the expense covered.

In your case, you do not receive a travel allowance from your employer. This would indicate that your employer does not consider you to be travelling on work. Therefore, the exception from substantiation will not apply and you cannot use the reasonable allowance amounts for your meal expenses as outlined in TD 2010/19.