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Ruling

Subject: work related expenses

Question

Are you entitled to a deduction for ingredients, meals and travel expenses?

Answer: No.

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts and circumstances

You are a head chef at a restaurant

Your employer expects you to go and eat at restaurants and experiment at home in order to continuously improve the restaurant's menu.

You are paid an allowance as part of your remuneration package. The allowance is provided to cover the cost of any menu creating, sampling, and associated travel.

You take inspiration from award winning restaurants, sometimes situated in other cities.

You incurred various expenses in relation to the following:

1. Menu creation:

These costs consist of the purchase of ingredients in order to create new dishes at home suitable to add to the restaurant's menu. You maintain receipts and take notes, comments and improvements to dishes prior to adding to the restaurant's menu.

2. Menu sampling

These costs consist of meals purchased at restaurants that you look to for inspiration in order to keep your employer's menu up to date with new and current trends. You usually dine with a friend and sample everything that comes to the table. You obtain verbal critical appraisal from the accompanying person. You keep notes from the experience, updates your recipes and menu where appropriate.

3. Associated travel

These costs include two trips to Melbourne, both taken to dine at award winning restaurants that you look to for inspiration.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

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.

The receipt of an allowance does not necessarily give rise to a deduction, the deductibility of expenses must be looked at in isolation and in accordance with the relevant deductibility principles.

For expenses to be an allowable deduction under section 8-1 of the ITAA 1997 there must be a sufficient connection between the outgoing and the activities directed at gaining or producing assessable income. The decision in Ronpibon Tin v. FCT (1949) 78 CLR 47; (1949) 8 ATD 431, confirms that for an outgoing to be deductible, a taxpayer has to establish that there is a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of the assessable income.

The essential character of the expenditure must be identified to determine whether it is in reality an outgoing incurred in gaining or producing assessable income. Where an expense is partly for income producing purposes and partly for private purposes, an apportionment of the expenses may be appropriate.

The Commissioner provides guidance on the deductibility of travel expenses in Taxation Ruling TR 98/9. Whilst the ruling discusses self-education expenses the principles contained in it can be applied to your situation.

TR 98/9 explains that airfares, accommodation and meal expenses incurred on overseas study tours or sabbatical, on work-related conferences or seminars, or attending an educational institution are deductible if the necessary connection with a persons income producing activity exists.

However, TR 98/9 explains that if the subject of the self-education is too general in terms of the taxpayer's income-earning activities, the necessary connection between the expense and the income earning activity does not exist.

In the Board of Review Case R47 84 ATC 380; (1984) 15 ATR 824, the taxpayer, a French language teacher, claimed a deduction for part of the expenses in travelling to France. The trip was not undertaken at the request of the taxpayer's employer. She asserted that the trip increased her teaching skills.

The Board of Review stated that the fact that the taxpayer became a better teacher because of the trip did not mean that expenses were incurred in the course of gaining her assessable income as a teacher. The expenditure was incurred in relation to a period during which the taxpayer was without obligation to render service to her employer.

In Cooper v FCT (1991) 29 FCR 177; 91 ATC 4396; (1991) 21 ATR 1616, a professional footballer was denied the cost of buying additional food and drink that his coach had instructed that he consume to maintain his weight during the football season. Justice Hill said:

Food and drink are ordinarily private matters, and the essential character of expenditure on food and drink will ordinarily be private rather than having the character of a working or business expense. The fact that the employee is required, as a term of employment, to incur a particular expenditure does not convert expenditure into a deductible outgoing.

In your case, while you may obtain ideas and knowledge while dining in restaurants and practising your cooking skills, the expenses are not necessarily incurred in earning the assessable income. The expenditure incurred has the character of a private expense. The connection is too general or remote to allow a deduction for any portion of the cost. The meals are considered to be a private matter and as such the travel and accommodation associated with the meals are also private.

Accordingly you are not entitled to a deduction for the expenses incurred for travel, accommodation and meals and ingredients.