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Ruling

Subject: Deduction - meals

Question

Are you entitled to a deduction for the additional meal expenses incurred when you were posted overseas and maintained your home in Australia?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 2011

Year ended 30 June 2012

The scheme commences on:

01 July 2010

Relevant facts and circumstances

You are employed by a government department.

You were posted overseas for a period of time working as the representative of the government department with an overseas organisation.

You secured this posting through an expression of interest process and were nominated for the position.

You continued to be paid by your employer with support by another government department.

The other government department provided you with a series of posting allowances to cover additional costs of living for being away from home for the period of time.

You received a Cost of Posting Allowance (COPA) each fortnight. This amount was grossed up to include income tax.. The COPA was included in your assessable income.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 80-1

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, or relate to the earning of exempt income.

The cost of meals is generally a non-deductible private expense unless the occasion of the outgoing gives the expenditure the essential character of a working expense.

The issue of the deductibility of meals was considered by the Full Federal Court in Federal Commissioner of Taxation v. Cooper (1991) 21 ATR 1616; 91 ATC 4396 where Hill J stated (ATR at page 1638; ATC at page 4415)

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. However, the occasion of the outgoing may operate to give to expenditure on food and drink the essential character of a working expense in cases such as those illustrated of work-related entertainment or expenditure incurred while away from home.

The reference to 'expenditure incurred while away from home' is a reference to the situation where a taxpayer must travel away from home for the purposes of their employment. Where a taxpayer is required to travel for work purposes, the cost of meals may be deductible subject to substantiation requirements.

In Roads and Traffic Authority of NSW v. FC of T 93 ATC 4508; (1993) 26 ATR 76), Hill J considered the circumstances in which various allowances paid to road construction and repair crews who were required to camp away from home would have been deductible if the expenditure had been incurred by the employee. In the process of determining that the hypothetical expenditure on meals by the employees would have been deductible expenses, Hill J set down a general rule by which deductibility of such expenditure is to be determined at p 4522:

Where a taxpayer is required by his employer, and for the purposes of his employer, to reside, for periods at a time, away from home and at the work site, and that employee incurs expenditure for the cost of sustenance, or indeed other necessary expenditure which, if the taxpayer had been living at home, would clearly be private expenditure, the circumstance in which the expenditure is incurred, that is to say, the occasion of the outgoing operates to stamp that outgoing as having a business or employment related character.

In addition, Hill J noted the following features of the employee's working conditions that supported claims for deductibility of expenditure on sustenance and other necessary items:

They are required, as an incident of their employment, by their employer and for the purposes of their employer to live close by their work site for relatively short periods of time. No question arises of their choosing to live in these places. Each of the persons in question has a permanent house in which he lives when not in camp. None of the employees spend inordinate periods of time in the camps so that the camp becomes their home. Their house is retained and the employees in question travel home at weekends. They do not remain in the camps.

However, Hill J did observe that where an employee has no private home and is employed indefinitely to work at a particular site, then that employee might be said to have chosen to live at the site so that the cost of the employee's accommodation there would be private.

In Case H37 76 ATC 312; Case 3 21 CTBR (NS), the taxpayer was granted special leave with pay from his full-time employment to take up temporary employment in Canberra. So that he would be able to do the work required of him in that temporary employment, he travelled from his home town to Canberra and found himself accommodation there. He claimed a deduction for living expenses incurred during the period of his employment in Canberra. It was held that the expenses he incurred while in Canberra were expenses of a private or domestic nature and not deductible.

In this case, C.F.Fairleigh Q.C (Member) stated (at page 317):

The provision of overnight accommodation is not inevitably of a private and domestic nature when regard is had to the conditions under which some labour is carried out, e.g. in certain circumstances by some cane-cutters, shearers, railway linesmen, judges on circuit etc. ….It will be a question for determination on the facts in each instance whether the outlay for the accommodation is of a private and domestic nature. Where it is held to be otherwise the question may then arise whether meals associated with the overnight stay cease to have the characteristics which they normally do have and take on the same character as the overnight stay itself…..

I would decide the present question by holding that the acceptance of this employment in a distant town for a fixed period of several weeks carries the implication that accommodation and meals in that town are a private and domestic matter for the employee.

It was decided by the Board of Review in 14 CTBR (NS) Case 56, that expenses for mess fees incurred by the taxpayer were held to be private or domestic in nature and not deductible. In this case, the taxpayer, who was a probationary trainee policeman was compulsorily required to reside at a central police barracks during the training period, except for leave at the weekends when he returned home to his family.

In Fullerton v. FC of T 91 ATC 4983, the taxpayer was transferred to a number of different locations. The employer reimbursed a portion of the relocation expenses and the taxpayer claimed the balance as a tax deduction. It was held that the expenditure on the taxpayer's domestic or family arrangements was not deductible, even though the expenditure had a causal connection with the earning of income.

In FC of T v. Charlton 84 ATC 4415 where Crocket J contends that:

If the taxpayer should choose to reside so far from the place where it is necessary for him to be in order to gain his income that he not only needs to incur expense in travelling to that place but also to incur expense in the provision to him of some accommodation transitory or discontinuous in its use and secondary to or temporarily supplemental of his actual home, then that expense, too, is for the same reason non-deductible.

In FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 the Federal Court disallowed a forest worker's deduction for the cost of maintaining a caravan and other living expenses. The taxpayer incurred the expenses in providing temporary accommodation at the base camp because the taxpayer had chosen to reside at a place far from the worksite. These expenses were dictated not by work but by private considerations.

As can be seen there are a number of cases where expenses have been incurred by taxpayers in living in different places for various reasons and as noted various Boards, Courts and Tribunals have considered that where taxpayers have moved to a location to undertake the duties of employment, living expenses are private in nature.

Your case is similar to the various cases where taxpayers have relocated to undertake the employment. You applied for and accepted the position to work overseas as your employer's representative with the overseas organisation. You relocated overseas in order to carry out the work with the overseas organisation. It was not a requirement of your employer for you to travel away from your usual place of residence, but a choice made by you to apply for and accept the position overseas which would require you to be away from home.

As such, the expenses you incurred for meals during the period you were overseas were incurred to enable you to stay in close proximity to your work place. They are a private expense and are not expenses incurred in the course of gaining or producing your income. Therefore, you are not entitled to a deduction for meals expenses under section 8-1 of the ITAA 1997.