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Ruling

Subject: reasonable travel allowance amounts

Question

Are you able to use the reasonable rate for cost group 2 for Country X?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2011

Year ending 30 June 2012

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

You are employed doing development work in foreign countries.

You have undertaken contracts in Country X.

Country X is not listed in Table 1 of Schedule 1 of Taxation Determination TD 2010/19 or Taxation Determination TD 2011/17.

Country Y is listed in Table 1 of Schedule 1 of TD 2010/19 and TD 2011/17.

You believe that the cost structure of Country X is similar to Country Y in terms of the cost of food, restaurants and sundries.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Subdivision 900-B

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.

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 and 2011-12 income year they are contained in Taxation Determinations TD 2010/19 and TD 2011/17 respectively.

The above Taxation Determinations contain the reasonable amounts for overseas travel expenses in Schedule 1. Table 1 of Schedule 1 sets out the cost group to which a country has been allocated. Table 2 of Schedule 1 sets out the reasonable amount for meal and incidental expenses for each cost group for specified salary ranges for the relevant income year.

If an employee travels to a country that is not listed in Table 1 of Schedule 1 of TD 2010/19 or TD2011/17 the employee can use the reasonable amount for cost group 1 in Table 2 for the relevant salary range.

Taxation Ruling TR 2004/6 provides that any variation to the Commissioner's reasonable amount would be considered only in unique or unusual circumstances where there are strong grounds for departure from the reasonable amount published.

To grant a variation to the published reasonable amount we would need to be satisfied that the Commissioner's reasonable amount is unreasonable in the particular circumstances of the employee (TR 2004/6 paragraph 48). Some unique circumstances may be when a taxpayer travels for work to an area where there has been a natural disaster or where, at the time of travel, a significant event such as the Olympic Games or World Expo is being held. Under these types of circumstances, there may be grounds for departure from the Commissioner's published reasonable amounts for these journeys.

In your case, you have travelled to Country X, which is not listed in Table 1 of Schedule 1 of TD 2010/19 or TD 2011/17. Country Y is listed in Table 1 of Schedule 1 of TD 2010/19 and TD 2011/17 as cost group 2. You have argued that the cost structure of Country X is similar to that of Country Y; therefore you believe you should be entitled to claim reasonable amounts as listed in cost group 2.

There are no unique or unusual circumstances in your case that would provide strong grounds for a departure from the reasonable amount published in TD 2010/19 or TD 2011/17. Accordingly, the reasonable amount for the substantiation exception in subdivision 900-B of the ITAA 1997 in regards to travel allowance expenses incurred in Country X will be in accordance with the amounts listed under cost group 1 of Table 2 of Schedule 1 of TD 2010/19 and TD 2011/17.