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Ruling

Subject: Travel expenses - reasonable allowances

Question

Are you entitled to a deduction for meal expenses up to the reasonable amount without substantiation when you travel interstate for work?

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 consultant.

You are engaged by your employer as a contractor, but you are a deemed employee earning personal services income.

You are required to travel for your employment. You travel interstate and are away overnight. You incur the cost of meals while you are away.

You are not paid a travel allowance due to the nature of your employment as a contractor. As a contractor, you do not receive a PAYG summary.

You do invoice your employer for costs incurred while travelling interstate for work.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 900-50

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 cost of meals is generally considered to be a private or domestic expense and not deductible. An exception to this is where you are undertaking work-related travel, for instance you attend a work-related seminar in another town and are required to stay overnight.

In considering the deductibility of travel expenses a distinction is made between travel to work and travel on work. It is only if the duties of the job require a taxpayer to travel in the course of undertaking their work duties that the taxpayer's expenses can be deducted (Taylor v Provan 1975 AC 194).

In your case, you are required to travel interstate for work purposes. You incur meal expenses while travelling overnight. Accordingly, you are entitled to a deduction for the meal expenses where you can provide substantiation.

Substantiation

Under subdivision 900-B of the ITAA 1997, a deduction is not allowable for a work expense unless the expense qualifies as a deduction under another provision of the income tax legislation (for example section 8-1 of the ITAA 1997) and written evidence of the expense has been obtained and retained by the employee taxpayer.

However, there are exceptions where written evidence is not required to substantiate the expense. Section 900-50 of the ITAA 1997 provides relief from the substantiation provisions for travel expenses claimed, other than for overseas accommodation, where a bona fide travel allowance has been paid to the employee to cover the expenses and the expenses claimed are within the amount considered reasonable by the Commissioner.

Reasonable allowance amounts are published each year. For the 2010-11 income year they are contained in Taxation Determination TD 2010/19.

Taxation Ruling TR 2004/6 provides that for domestic or overseas travel allowance expenses to be considered for exception from substantiation, the employee must be paid a bona fide travel allowance. The allowance must be paid to cover work-related travel expenses incurred for travel away from the employee's ordinary residence, undertaken in the course of performing duties as an employee (subsection 900-30(3) of the ITAA 1997) and which involves sleep away from home. The work-related travel expenses must be for accommodation, or food or drink, or expenses incidental to the travel.

In your situation, you are required to travel interstate for work purposes. Although you may receive reimbursement for expenses by invoicing your employer, you do not receive a bona fide travel allowance.

You do not qualify for the exemption from the requirement to substantiate your expenses under section 900-50 of the ITAA 1997. Accordingly, you are not entitled to a deduction for meals up to the reasonable travel amounts without substantiation.