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Ruling

Subject: Travel expenses

Question 1

Are you entitled to claim a deduction of the Commissioner's reasonable travel amount for your travel expenses?

Answer

No.

Question 2

Are you entitled to claim a deduction for travel expenses you have actually incurred?

Answer

Yes.

Question 3

In order to claim a deduction for the travel expenses you have actually incurred, are you required to declare your travel allowance as assessable income?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

You are required to travel all around the country for work. For example, last month you travelled to a number of towns in another State.

You stay in hotels, motels or caravan park cabins while working away.

In the 2010-11 financial year you travelled away for approximately 100 days in total and you received a travel allowance of $120 a day.

The travel allowance not is shown on your payment summary.

The allowance is received to cover the cost of accommodation and meals.

You spend, on average, $80-120 per day on your accommodation and average $80 for food and drink.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Income Tax Assessment Act 1997 Section 900-30.

Income Tax Assessment Act 1997 Section 900-50.

Reasons for decision

Summary

You are entitled to claim a deduction up to the Commissioner's reasonable travel amount where you include the travel allowance as assessable income and the expenses are actually incurred.

Detailed reasoning

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.

In respect to travel expenses, where employees are required to sleep away from home as part of their employment duties, a deduction for meals and accommodation may be allowable.

Section 900-30 of the ITAA 1997 states that travel allowance expenses are work expenses if they are incurred for travel, food or drink and are covered by a travel allowance. A travel allowance is an amount that an employer pays you to cover specific work-related travel expenses you incur for accommodation or food or drink or incidental expenses when travelling in the course of your duties as an employee.

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 900-50 of the ITAA 1997 states an exception to this rule applies if you receive a bona fide travel allowance to cover accommodation or food and drink and the expenses do not exceed amounts the Commissioner deems reasonable. A bona fide travel allowance is an amount that could reasonably be expected to cover accommodation, or meals or expenses incidental to travel. This does not require that the amount paid by the employer must equate dollar for dollar to the employee's actual expenditure. Taxation Determination TD 2010/19 provides the Commissioner's reasonable amounts for the 2010-11 financial year.

Taxation Ruling TR 2004/6 discusses the conditions when this substantiation exception applies. Where your travel allowance is included on your payment summary, you must declare this allowance in your assessable income. To be entitled to claim a deduction for travel expenses, in addition to including the travel allowance as assessable income, the expense must actually be incurred.

Consequently, where these circumstances are met, the total expense of travel 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 usually stay at motel A and purchase B food and C drink at a cost of $D. This is multiplied by the number of times you incurred the expense when you are away from home and you are paid the allowance

In your case, you received a travel allowance from your employer of $120 for each day you were required to travel for work. This allowance was received to cover your accommodation and meal expenses incurred as a result of this travel. It is accepted that the allowance is a bona fide travel allowance. The travel allowance you received must be included as assessable income in your income tax return for the 2010-11 financial year if you wish to claim a deduction for your travel expenses.

You wish to claim travel expenses using the Commissioner's reasonable amount for accommodation, food and drink for the 2010-11 financial year of $227.35. However you have stated that, on average you only spend between $80-$120 a night on accommodation and $80 a day on food and drink which averages $180 per day. You would need to reduce your claim to reflect the amount you actually incurred.

Therefore, you are entitled to claim a deduction up to the Commissioner's reasonable travel amount, where you include the travel allowance as assessable income and the expenses are actually incurred. You may still be required to show the basis for determining the amount of your claim and that the expense was actually incurred for work related purposes.