Edited version of your private ruling

Authorisation Number: 1012503476615

Ruling

Subject: Travel expenses

Question 1

Are you entitled to a deduction for expenses in travelling to and from work?

Answer

No.

Question 2

Are you entitled to a deduction for your meal expenses while working away from home?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

1 July 2012

Relevant facts

You are an employee.

You travel away from home for your work.

Your employer pays you a travel and camp allowance to compensate you for your travel and meal expenses whilst working away from home.

Your employer regards the allowances as a living away from home allowance and the payments are not showing on your payment summary.

You work at various work sites during the year. You work at each work site for approximately one month.

You completed a living away from home declaration form for your employer. Your employer also refers to the declaration as being an accommodation and travel reimbursement declaration.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Allowable deductions

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, or a provision of the ITAA 1997 prevents it.

A deduction is only allowable if an expense:

§ is actually incurred,

§ meets the deductibility tests and

§ satisfies the substantiation rules.

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).

Assessable income

Section 15-2 of the ITAA 1997 states that your assessable income includes the value to you of all allowances, gratuities, compensation, benefits, bonuses and premiums provided to you in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by you.

Therefore travel allowances form part of a person's assessable income.

However, a genuine living away from home allowance (LAFHA) is not included in an employee's assessable income. A LAHFA is a fringe benefit under the Fringe Benefit Tax Assessment Act 1986 and is subject to tax in the employer's hands. Income derived by a taxpayer through the provision of a fringe benefit by an employer is not assessable income in the employee's hands by the operation of section 23L of the Income Tax Assessment Act 1936.

As a LAFHA is not included in an employee's assessable income, they are not entitled to any deduction for the associated expenses. That is, the associated expenses are not incurred in earning assessable income.

Therefore, in your case, your employer paid you a LAFHA. As this allowance is not assessable income, you are not entitled to a deduction for any of the associated travel or meal expenses.

Information provided also refers to your payments as a reimbursement. Reimbursements are not generally regarded as assessable income, therefore no deduction is allowable in relation to such a payment.