Edited version of your private ruling

Authorisation Number: 1012502804262

Ruling

Subject: Meal expenses

Question

Are you entitled to a deduction for meal expenses incurred up to the Commissioner's reasonable allowance amounts, without substantiation where your travel allowance is declared as assessable income?

Answer

Yes.

This ruling applies for the following periods:

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

Year ended 30 June 2016

The scheme commenced on

1 July 2010

Relevant facts

The arrangement that is the subject of the Ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are:

§ the application for private ruling and

§ additional information including your employment agreement and travel diary information.

You are an employee who travels overseas for work.

Your employer provides you with a bona fide per diem allowance when you travel away from home overnight for work.

The allowance helps cover your meal expenses.

Your meal expenditure exceeds the allowance amount, but does not exceed the Commissioner's reasonable amounts.

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

Income Tax Assessment Act 1997 Section 900-55.

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.

A number of significant court decisions have determined that for an expense to be an allowable deduction:

§ it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense (Lunney v. FC of T; (1958) 100 CLR 478 (Lunneys case)), 

§ there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income (Ronpibon Tin NL v. FC of T, (1949) 78 CLR 47), and

§ it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income (Charles Moore Co (WA) Pty Ltd v. FC of T, (1956) 95 CLR 344; FC of T v. Hatchett, 71 ATC 4184).

A deduction is only allowable if an expense:

§ is actually incurred,

§ meets the deductibility tests, and

§ satisfies the substantiation rules.

Expenditure on the daily necessities of life (for example, food and drink) is generally not deductible as it is not incurred in gaining or producing assessable income and is also considered to be private or domestic in nature.

Exceptions to this are where you are undertaking work-related travel and are required to stay away overnight or you work overtime and receive an overtime meal allowance.

In your case you are away from home overnight for work and receive an allowance on such occasions.

Such an allowance is assessable income. However, the receipt of an allowance does not automatically entitle you to a deduction. The expenses must meet the criteria for deductibility under section 8-1 of the ITAA 1997 as well as meet the substantiation requirements.

Division 900 of the ITAA 1997 sets out the substantiation requirements when claiming expenses but also provides some exceptions available for certain work related expenses.

Subdivision 900-B of the ITAA 1997 provides an exception from the substantiation requirements for domestic and overseas travel allowance expenses.

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.

Section 900-50 of the ITAA 1997 provides that you can deduct a travel allowance expense for travel within Australia without getting written evidence or keeping travel records if the Commissioner considers reasonable, the total of the outgoings you claim for travel covered by the allowance.

Similarly, section 900-55 of the ITAA 1997 provides that you can deduct a travel allowance expense for travel outside Australia without getting written evidence under the same conditions as for domestic travel allowances, except that you still have to get written evidence for losses or outgoings for accommodation.

The exception from substantiation for travel allowance expenses provided by sections 900-50 and 900-55 of the ITAA 1997 will only apply where all three of the following criteria are met:

§ you received a bona fide travel allowance and the allowance is included in your assessable income,

§ your claim for travel expenses does not exceed the reasonable amounts set out by the Commissioner for travel allowance expenses, and

§ you have actually incurred the amount of the expense claimed.

The Commissioner publishes reasonable amounts for meals and deductible expenses incidental to travel. Taxation Determination TD 2010/19, TD 2011/17, TD 2012/17 and TD 2013/16 set out the relevant amounts that the Commissioner considers reasonable for the 2010-11 to 2013-14 income years. The amounts set for meal expenses represent amounts that could reasonable be expected to be incurred for such expenses.

In your case, you were paid a bona fide allowance when you were away from home overnight for work. To be entitled to claim a deduction for your work related meal expenses, in addition to including the allowance as assessable income, the expense must be actually incurred and the relevant records kept.

Please note, where you are away from home for six or more nights in a row, you need to keep travel records. A travel record is to show which of your activities were undertaken in the course of producing your assessable income.

Therefore, you are entitled to claim a deduction up to the Commissioner's reasonable travel amount, where you include the travel allowance as assessable income and the expenses are actually incurred.

You may still be required to show the basis for determining the amount of your claim and that the expense was actually incurred for work related purposes.