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Ruling

Subject: Work related travel expenses

Question

Where you include your travel allowance as assessable income, are you entitled to a deduction without substantiation for travel expenses up to the reasonable amount?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

The scheme commences on:

1 July 2009

Relevant facts and circumstances

You are an Australian resident for tax purposes.

Your work requires that you stay in different cities between your rostered shifts.

You are provided with accommodation at a hotel and a travel allowance by your employer for the nights you are away from home.

The travel allowance is designed to cover your meals and incidental expenses at the hotel where you are accommodated. Your employer has negotiated discount rates for meals and incidentals and the rate you receive varies at different locations and is reflected in the amount of the daily allowance you receive.

The travel allowance is paid to you in cash.

When you purchase your meals and incidentals at locations other than the motel where you are staying you do not have the advantage of a negotiated discount.

The travel allowance is not included on your PAYG certificate.

The travel allowance is paid for specific work-related travel and the rules for entitlement are set out in your employer's operations manual.

You are able to obtain full details of all payments you received.

You have kept a travel diary but do not keep receipts for your meal and incidental purchases or a record of your expenditure.

You do not have a way to show that you incurred the meal and incidental expenses and do not have a basis for determining the amount of your claim for these expenses.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 900-50

Income Tax Assessment Act 1997 Section 900-65

Income Tax Assessment Act 1997 Section 900-150

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for a loss and outgoing to the extent that it is incurred in gaining or producing assessable income. However, a loss or outgoing is not deductible if it is of a capital, private or domestic nature, or it is incurred in gaining or producing exempt income.

The cost of meals is normally considered to be a private expense and is not an allowable deduction under section 8-1 of the ITAA 1997. However, where you are required to sleep away from home in the performance of your duties, expenditure on food and drink is considered to have been necessarily incurred in the performance of your duties and a deduction is allowable.

In addition to the above, most work related travel expenses must also satisfy the substantiation requirements of Division 900 of the ITAA 1997.

However, section 900-55 of the ITAA 1997 provides an exception to this substantiation requirement where a travel allowance is received for domestic travel expenses. If a travel allowance is received and the amount of the claim for expenses is no more than the reasonable amount, as determined by the Commissioner, substantiation is not required.

The Commissioner's view on how the exception from substantiation rule for travel expenses should be applied is set out in Taxation Ruling TR 2004/6. For the exemption to be granted the employee must be paid a bona fide travel allowance and the amount must be included in assessable income. A travel allowance that is not paid or payable to cover specific work related travel is not considered a travel allowance for the purposes of the exception from substantiation. For example, a fixed annual travel allowance amount, paid regardless of how often travel is actually undertaken, would not qualify for the exception from substantiation.

Furthermore, the amount of a bona fide travel allowance must be an amount that could reasonably be expected to cover meals or expenses incidental to the travel. What is considered to be a bona fide travel allowance depends on the facts of each case.

Taxation Ruling TR 2004/6 explains that an expense must be actually incurred as required by section 8-1 of the ITAA 1997, before a claim can be made. You cannot automatically claim a deduction just because you receive an allowance. For example, even though a taxpayer may claim a total of $300 for work expenses without substantiation, they would only be entitled to a deduction of $50 if they only spent $50 on work expenses.

Furthermore, as outlined in paragraphs 15 and 39 of TR 2004/6, if you rely on the exception from substantiation, you may still be required to show the basis for determining the amount of your claim, that you actually incurred the expense, and that it was 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.

In your case, your employer has negotiated discount rates for meals and accommodation at designated hotels at your stopover location. Your employer provides you with an allowance to cover these expenses.

You have provided no evidence which would indicate that you did not avail of the discounted meals and accommodation provided by your employer. You have kept no records and have no basis for demonstrating that you incurred expenditure up to the Commissioner's reasonable amounts.

You are therefore not entitled to a deduction for the expenses incurred without substantiation.