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Ruling

Subject: Travel expenses

Question

Are you entitled to a deduction for meal and incidental expenses incurred while you were working overseas?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

You were required by your employer to work overseas in city A for approximately six months.

Your employer directly paid you a per diem amount per day.

This allowance is determined by company policy and covers all meals and incidentals.

The per diem amount you received is lower than the reasonable travel amounts published by the ATO.

The allowance did not appear on your PAYG summary.

The allowance you received was not sufficient to cover your expenses.

Assumptions

None.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Summary

You were temporarily relocated overseas to city A to work. The expenses you incurred for meals and incidentals, while living away from home are of a private nature.

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, or relate to the earning of exempt income.

Taxation Ruling TR 2004/6 explains that a taxpayer cannot automatically claim a deduction just because they receive an allowance. The expense must meet the requirements of section 8-1 of the ITAA 1997.

Accommodation, meal and incidental expenses are ordinarily not deductible as they are private and domestic in nature.

An exception is where a taxpayer is travelling in the course of performing their work duties, for example, an interstate truck driver who travels away from home overnight. In these types of cases, the accommodation, meal and incidental expenses incurred while the taxpayer is travelling are incidental to the proper carrying out of their employment function and cease to be of a private and domestic nature.

However, it is important to distinguish taxpayers who travel in the course of carrying out their employment duties from taxpayers who are living away from home. In the latter case, the taxpayer moves and takes up temporary residence away from their usual place of residence so as to be able to carry out employment duties for a time at the new (but temporary) workplace.

For taxpayers who are living away from home, there is a change of job location and a temporary change of residence to a place at or near that location. For example, an employee who is transferred for three months to an office in another city and takes up temporary accommodation in that city whilst maintaining their own usual place of residence would be in this category. In this type of situation, the accommodation, meal and incidental expenses incurred while the person is living away from their usual home do not cease to be private and domestic in nature. That is, they are considered to retain their character as living expenses rather than becoming work related expenses.

Miscellaneous Taxation Ruling MT 2030 discusses the difference between travelling on work and living away from home for work. It states that taxpayers who are travelling on work normally do so for comparatively short periods and as a general rule where the period does not exceed 21 days, the taxpayer will be considered to be travelling on work.

In your case, you were working and living overseas for a period of approximately six months. Your employer paid you an allowance to cover your meals and incidentals. It is considered that you were living away from home for work rather than travelling on work. That is, it is not considered that travel was a part of your actual work duties. Rather, you were required to take up temporary residence near your new work location.

Therefore, your meal and incidental expenses are considered to retain their character as living expenses. As these expenses are private in nature, a deduction is not allowable. This conclusion is not altered by the fact that your employer paid you an allowance.

Additional information

The reasonable amounts are only relevant where a taxpayer is travelling on work. As you had temporarily relocated rather than travelling on work, the reasonable amounts are not applicable in your situation.