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Ruling

Subject: Substantiation of work related travel expenses

Question

Are you entitled to a deduction for meal expenses actually incurred up to the Commissioner's reasonable amount without substantiation?

Answer

Yes.

This ruling applies for the following period:

Year ending 30 June 2012

The scheme commences on:

1 July 2011

Relevant facts

You resumed employment as an employee truck driver during the 2011-12 financial year. You are provided with a meal allowance and an overnight travel allowance for each night you are required to sleep away from home in the course of your employment which is considered to be a bona fide travel allowance.

You incur costs for your meals.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1,

Income Tax Assessment Act 1997 Section 900-50 and

Income Tax Assessment Act 1997 Subdivision 900-B.

Reasons for decision

Work related travel expenses 

Work related expenses generally fall for consideration under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). This section allows a deduction for losses and outgoings which are incurred in the course of gaining or producing assessable income, unless the losses or outgoings are capital, or are of a capital, private or domestic nature. 

A deduction is allowable if an expense;

(a) is actually incurred;

(b) meets the deductibility tests; and

(c) satisfies the substantiation rules.

Subject to certain requirements, a deduction is allowable for work related travel expenses incurred by an employee truck driver who is required to sleep away from home. Work related travel does not occur unless the truck driver sleeps away from his or her ordinary residence while performing their duties. That is, an employee truck driver is not considered to be travelling in the course of income earning activities unless required to sleep away from their ordinary residence while performing their duties (Taxation Ruling TR 95/18).

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 and written evidence of the expense has been obtained and retained by the employee taxpayer. However, section 900-50 of the ITAA 1997 provides relief from substantiation for travel allowance expenses claimed that are within the reasonable allowance amounts. Taxation Ruling TR 2004/6 provides guidance on the substantiation exception for reasonable travel and overtime meal allowance expenses.

Taxation Ruling TR 2004/6 states the following in relation to claiming the Commissioners reasonable rates:

For domestic and/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.

An employee truck driver who, in the course of earning his or her income, is required to sleep away from home, is considered to be travelling for work and may incur meal expenses as part of a work-related travel expense. Truck drivers generally do not incur accommodation expenses when travelling for work, as they sleep in their truck. Accommodation expenses incurred as part of work-related travel must be substantiated with written evidence as described in subdivision 900-E of the ITAA 1997. The Commissioner sets out each year the reasonable amounts for food and drink expenses incurred by employee truck drivers as part of a travel allowance expense.

However, TR 2004/6 also states the following:

Unless the following exception applies, all allowances must be shown as assessable income in the employee's tax return. However where:

· the allowance is not shown on the employee's payment summary;

· the allowance received is a bona fide overtime meal allowance or a bona fide travel allowance;

· the allowance received does not exceed the reasonable amount; and

· the allowance has been fully expended on deductible expenses,

· the allowance received is not required to be shown as assessable income in the employee's tax return. Where the allowance is not required to be shown as assessable income in the employee's tax return, and is not shown, a deduction for the expense cannot be claimed in the tax return.

In your case, you receive a meal allowance and an overnight travel allowance for each instance where you are required to stay the night away from home in the course of your employment. You are therefore considered to have received a bona fide travel allowance. You may therefore be eligible for the exception from substantiation outlined in TR 2004/6.

If the travel allowance expense or overtime meal allowance expense claimed qualifies for exception from substantiation, it is not necessary to keep written evidence as would otherwise be required under Subdivision 900-E of the ITAA 1997. The objective of the exception is to relieve taxpayers, who are covered by the exception from substantiation, from the requirement to determine claims relying on detailed calculations based on records or receipts.

However, a taxpayer 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 counts as evidence for a claim subject to the substantiation exception will vary according to individual circumstances and the nature of the expense. If necessary, it is acceptable for a reasonable estimate to be the basis for claims having regard to the taxpayer's occupation and the types of expenses that would be expected to be incurred. This is a significantly lesser requirement than the need to keep written evidence.

For example, an estimate that on each overnight trip you spend $15 each for breakfast and lunch and $25 for dinner would be a sufficient basis for your deduction claim provided the total claimed does not exceed the Commissioner's reasonable amount.

A taxpayer can choose not to use the exception from substantiation. Each taxpayer can decide between maintaining fewer records and claiming less than the reasonable amount, which in some circumstances may be lower than the amount actually incurred, or keeping written evidence and claiming the full amount of deductible expenses incurred, which may be higher than the reasonable amount.

If you do choose to claim more than the reasonable amount however, you must keep full records of all of your expenses in the form of receipts, or for expenses where it is considered too difficult to obtain receipts such as vending machines, notations in your driver log book or some other record.

Please note that the Commissioner's reasonable amount is not intended to be used as the basis for a deduction calculation. It is merely the amount at which the exception from substantiation is no longer available, and all expense deduction claims, not just those above the reasonable amount, must be fully substantiated.