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Ruling

Subject: Interstate truck driver - travel expense deductions

Question 1

Are you able to include your travel allowance as assessable income?

Answer 1

Yes

Question 2

Are you entitled to a deduction for travel expenses up to the Commissioner's reasonable allowance amounts where you have incurred expenses of at least the reasonable allowance amount?

Answer 2

Yes.

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

01 July 2010

Relevant facts and circumstances

You are employed as an interstate truck driver and you are away from home on a regular basis. Your travel covers the eastern states of Australia.

You are usually away from home for 5 nights a week and you sleep in the sleeper cabin of your truck and buy your meals as required.

You keep receipts for the expenditures that you incur while you are away and your log book verifies your destinations and length of time away.

Your employer pays you an allowance for each night that you are required to be away from home due to your work. The allowance relates to your meals and incidental costs.

Your employer pays this as a non-taxable amount and it is included with your regular weekly pay and is recorded on your weekly pay advice.

These payments have not been included on your 2011 PAYG payment summary.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 900-10

Income Tax Assessment Act 1997 section 900-30

Income Tax Assessment Act 1997 section 900-50

Reasons for decision

You were paid a travel allowance by your employer to cover expenses for food and incidental costs during the periods you were away from your usual place of residence overnight for work. As such, the amount of travel allowance you have received can be considered assessable as income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997). 

Section 8-1 of the 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 95/18 considers deductions available to an employee truck driver and states that a deduction may be allowable if meal costs are incurred by a truck driver who sleeps away from home while travelling for income-earning purposes.

Subdivision 900-B of the ITAA 1997 sets out the substantiation rules for work-related deductions, and provides for exceptions in the case of some types of expenses. One such expense is travel allowance expenses.

These may include expenses incurred for accommodation, meals and incidentals.  The travel must be away from your ordinary residence and undertaken in the course of your duties as an employee (section 900-30 of the ITAA 1997). 

The cost of meals and incidentals incurred in the course of work-related travel away from home may be deductible, however section 900-10 of the ITAA 1997 requires that you must be able to substantiate the expenses and provide written evidence and travel records. 

Section 900-50 of the ITAA 1997 provides that work-related domestic travel expenses covered by a travel allowance may be exempted from this requirement provided the Commissioner considers the total expenses you claim for travel covered by the allowance is reasonable.

Taxation Ruling TR 2004/6 explains the substantiation exception for reasonable travel allowance expenses and that it applies to individuals who incur work-related deductions for travel expenses where these expenses are covered by an allowance paid by the person's employer.

Whilst a person may be relieved from substantiating expenses up to the reasonable allowance limits, an expense must actually be incurred before a claim is made. Also, they may still be required to show the basis for determining the amount of their claim and that the expense was actually incurred for work-related purposes. What is a reasonable basis for determining the amount of a claim that is subject to an exception from substantiation varies according to individual circumstances and the nature of the expense.

For a travel expense to be considered for exemption from substantiation, the employee must be paid a bona fide travel allowance to cover specific travel. That is, the amount paid must be an amount that could reasonably be expected to cover accommodation, or meals or expenses incidental to the travel. What is considered to be a bona fide amount depends on the facts of each case. 

The daily amount that you receive is considered sufficient to reasonably meet your meal and incidental expenses and is considered be to be a bona fide payment.

Taxation Determination TD 2010/19 provides details of the Commissioner's reasonable allowance amounts for the 2010-11 financial year.

Taxation Ruling TR 2004/6 explains in detail how the substantiation exception operates, and the conditions that must be met to rely on the exception.

TR 2004/6 states that, where a bona fide meal allowance is received, a deduction is allowable without substantiation provided the expenses are actually incurred, and the claim does not exceed the amount considered reasonable by the Commissioner.

If the deduction claimed is more than the reasonable amount the whole claim must be substantiated, not just the excess over the reasonable amount.

When claiming a deduction for the expenses incurred, the allowance you receive must be included in your assessable income, that is, the allowance you receive must be declared as income in your tax return.

In your case, you received an overnight allowance which will be included in your assessable income when your tax return is lodged. You are entitled to a deduction for the costs incurred for your meals and incidentals.