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Ruling

Subject: Meal allowances and deductions

Question 1

Are you entitled to a deduction for the cost of meals purchased when working overtime and you have received an overtime meal allowance?

Answer

Yes.

Question 2

Are you entitled to a deduction for the cost of a meal when you have received a spoilt meal allowance or a late meal allowance?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

As part of your employment you are entitled to receive the following allowances:

o spoilt meal allowance

o overtime meal allowance

o late meal allowance.

You have provided an extract of the industrial agreement for your employment which provides information on when the allowances will be paid.

A spoilt meal allowance is paid where an employee is called back to duty before having consumed a meal during a meal break. In these situations you often have to purchase a second meal due to the first one spoiling.

An overtime meal allowance is paid when an employee is required to work overtime for more than two hours beyond the employee's rostered finishing time.

A late meal allowance is paid where a meal break is not provided in accordance with the Agreement. The employee receives a payment for each hour, or part hour, between the time they were meant to take the meal break and when the meal break is actually taken or the employee is released from duty.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Section 900-60

Reasons for decision

Summary

You are entitled to a deduction for the cost of a meal purchased when working overtime. Where you have received an overtime meal allowance you may claim up to the reasonable allowance amount without keeping written documentation provided you have spent that amount.

You are not entitled to a deduction for the cost of a meal where you have received a spoilt meal allowance or a late meal allowance as these allowances are paid when your normal meal break is interrupted or delayed. They do not relate to you working overtime and, as such, the related meal is not deductible.

Detailed reasoning

Section 8-1 of the Income Tax Assessment Act 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 or a provision of the taxation legislation excludes it.

Taxation Ruling TR 95/13 discusses allowances and reimbursements received by, and the deductibility of work-related expenses incurred by, employee police officers. Whilst you are not a police officer, the principles contained within the ruling can be applied to your situation.

The receipt of an allowance does not automatically entitle a taxpayer to a deduction.

Paragraphs 137 to 142 and 144 to 146 of TR 95/13 examine the deductibility of the cost of meals. A deduction is not allowable for the cost of meals eaten in the normal course of a working day. It is our view that the cost of meals will not have sufficient connection with the income-earning activities and, in any case, the cost is a private expense.

A deduction is allowable for the cost of meals bought while working overtime if an award overtime meal allowance is received. An overtime meal allowance is paid under a law or industrial award for the purpose of enabling an employee to buy food and drink at meal or rest breaks while working overtime.

The general rule is that no deduction is allowed for work-related expenses unless written evidence, such as a receipt, is obtained. However, special substantiation rules apply to overtime meal expenses if an employee receives an overtime meal allowance paid under an industrial award. A deduction is allowable without substantiation for expenses incurred, provided the claim does not exceed the amount considered reasonable by the Commissioner of Taxation. The reasonable amounts for the 2010/11 financial year are contained in Taxation Determination TD 2010/19.

Deductions relating to overtime meal allowance

You receive an overtime meal allowance under the Agreement where you work more than two hours beyond your rostered finishing time. As the Agreement is an industrial award you are entitled to claim a deduction for the cost of purchasing a meal while working overtime.

Where the cost of the meal is less than the reasonable overtime meal expenses amount you are not required to keep written substantiation but can only claim the cost of the meal. You cannot claim the full reasonable overtime meal expenses amount if you spend less than that amount.

Where the cost of the meal is more than the reasonable overtime meal expenses amount and:

o you do not have written substantiation you can claim the reasonable overtime meal expenses amount as a deduction

o you do have written substantiation you can claim the full cost of the overtime meal.

Deductions relating to spoilt meal allowance and late meal allowance

These allowances are paid when either you are interrupted whilst on your normal meal break or your meal break is delayed.

These allowances relate to your normal meal breaks and are compensation for the meal break being delayed or interrupted. The allowances received are not in connection with overtime worked.

Therefore you are not eligible for a deduction for the cost of a meal irrespective of the fact that a spoilt meal allowance or a late meal allowance was received or you have had to purchase a second meal.