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Ruling

Subject: Travel expenses

Question

Are you entitled to a deduction using the reasonable amounts for daily travel expenses?

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 employed by an Australian company and in the relevant year they sent you to work overseas for another company.

This company paid for your accommodation in serviced apartments.

You were away for a total of xx days, with the longest period being xx days.

You received an allowance of $xx for the xx days you were away.

This allowance is paid at a flat rate, no matter where you go.

You did not keep receipts for your expenditure on food and incidentals.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 900-50

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 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 2004/6 examines situations where you may be entitled to an exemption from substantiating travel expenses, where the expense is not more than the reasonable amounts published by the Tax Office.

Paragraph 18 of TR 2004/6 states that for overseas travel allowance expenses to be considered for exception from substantiation, you must be paid a bona fide travel allowance. The allowance must be paid to cover work-related travel expenses incurred for travel away from your ordinary residence, undertaken in the course of performing duties as an employee and which involves sleep away from home.

Further at paragraph 61 of TR 2004/6 the ruling provides an example where a token amount of allowance, for instance $5 per day to cover meals for travel that involves sleeping away from home, would not be considered a payment that is expected to cover the purchase of three meals per day while travelling for work. The payment would not be considered a travel allowance for the purposes of the exception from substantiation.

Paragraph 86 of TR 2004/6 states, a 'bona fide travel allowance' is an amount that could reasonably be expected to cover accommodation, or meals or expenses incidental to travel. This does not require that the amount paid by the employer must equate dollar for dollar to the employee's actual expenditure. However there must be relativity between the quantum of the travel allowance and the purpose for which it is said to be paid. A token amount, or a general payment, is not a bona fide travel allowance.

In your situation your employer pays you an allowance at a flat rate for your travel no matter where you travel. You received $xx for your travel, which amounts to an average of just over $xx a day. In comparison to the per diem rate for a level 6 country of $320.00 a day, the payment you received is clearly nominal.

Therefore, it is considered the allowance you received was not a bona fide travel allowance. As a result, you cannot use the Commissioners reasonable allowance amounts. You can only claim a deduction for the travel expenses you have actually incurred subject to being able to substantiate your claims in full with written evidence.