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Ruling

Subject: Accommodation expenses

Question

Are amounts paid for overnight accommodation deductible without written evidence, when you do not stay in commercial accommodation?

Answer

No

This ruling applies for the following period

Year ended 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts

You are required to travel including overnight stays in the course of your employment.

You are employed under an award.

The travel is generally but not always to capital cities.

The standard allowance paid by your employer is accommodation $xx for the first night with $xx for subsequent nights and $xx per day for meals and incidentals.

When you stay overnight you stay with acquaintances. These acquaintances are usually not related to either you or your employer.

Accommodation in these cases are usually provided by the acquaintance at their home and would generally include quality bedding, private bedroom and bathroom, cooked meals including drinks and relevant services such as internet access.

You may leave a sum of money with the acquaintance in recognition for the accommodation which is funded by but not limited to the travel allowance you receive. You do not ask for or receive a receipt.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 900-30

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, or relate to the earning of exempt income.

Section 900-30 of the ITAA 1997 states that travel allowance expenses are work expenses if they are incurred for accommodation, food or drink and are covered by a travel allowance. A travel allowance is an amount that an employer pays you to cover specific work-related travel expenses you incur for accommodation or food or drink or incidental expenses when travelling in the course of your duties as an employee.

As a general rule, written evidence is required to substantiate any expense you wish to claim as a deduction (for example, receipts or invoices of the expense).

Section 900-50 of the ITAA 1997 states an exception to this rule applies if you receive a bona fide travel allowance to cover accommodation or food and drink and the expenses do not exceed amounts the Commissioner deems reasonable.

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.

TR 2004/6 paragraph 24 states, the amounts set for domestic accommodation expenses represent amounts that could reasonably be expected to be incurred at commercial establishments such as hotels, motels and serviced apartments. The relevant amounts for accommodation are only considered reasonable amounts to claim if the expense is incurred for accommodation at these types of establishments, generally at daily rates. If alternative accommodation is used, these rates do not apply.

In your case, you received a travel allowance from your employer for each day you were required to travel for work. You have stated you may leave a sum of money with the acquaintance in recognition for your accommodation. Therefore you have incurred an expense for accommodation for work related travel. However, as you did not stay in commercial accommodation, the amounts are not reasonable amounts for the exception from substantiation to apply. Therefore you cannot claim a deduction for the amounts paid without written evidence.