Edited version of your private ruling

Authorisation Number: 1012531147867

Ruling

Subject: Work related travel expenses

Question and answer:

Are you entitled to a deduction for meal expenses up to the Commissioner's reasonable allowance amounts without substantiation?

No.

This ruling applies for the following period:

1 July 2012 to 30 June 2013.

The scheme commenced on:

1 July 2012.

Relevant facts and circumstances:

Your job requires you to travel and sleep away from home for various periods of time.

You are paid a meal allowance by your employer when you travel away from home.

The allowance is separately disclosed as an allowance in your payment summary.

You wish to rely on the exception from substantiation provisions to claim an unsubstantiated deduction for meal and incidental expenses.

The amount of the daily allowance you receive is approximately 50% of the relevant reasonable amounts set by the Commissioner in Taxation Determination TD 2012/17 Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2012-13 income year, and approximately one third of the average daily amount you wish to claim as an unsubstantiated deduction.

You have no evidence to substantiate your claim.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Division 900

Income Tax Assessment Act 1997 Subdivision 900-B.

Reasons for decision

Deductions for work related travel expenses - general

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.

A deduction is only allowable if an expense:

· is actually incurred,

· meets the deductibility tests (that is, it is not capital, private or domestic in nature), and

· satisfies the substantiation rules.

The general substantiation rules are contained in Division 900 of the ITAA 1997 with Subdivision 900-B of the ITAA 1997 containing specific rules for work related travel expenses.

For work related travel expenses (which may include the cost of food, drink and incidental costs associated with being required to sleep away from home for work purposes) the substantiation rules generally require written evidence of the expense to be obtained and retained as evidence of the expenditure. However, there is an exception to this general requirement if criterion are met.

Application of the substantiation exception to travel allowance expenses

Where domestic travel allowance expenses are incurred and meet the deductibility tests set down in section 8-1 of the ITAA 1997, section 900-50 of the ITAA 1997 provides an exception from the general substantiation requirements if the Commissioner considers the total of the amount claimed is reasonable.

With regard to what amounts the Commissioner considers reasonable for the 2013 financial year, reference must be made to Taxation Determination TD 2012/17 Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2012-13 income year?

Taxation Determination TD 2012/17 specifies the specific amounts considered reasonable by the Commissioner for the cost of meals and incidental expenses associated with travel to various locations in Australia and overseas.

The Australian Tax Office (ATO) view on the application of the substantiation exception to reasonable travel allowance expenses is contained in Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses.

Taxation Ruling TR 2004/6 specifies that for the exception from the normal substantiation provisions to apply to claims for work related travel expenses, one of the conditions that must be met is that the employee must have been paid a bona fide travel allowance. If a bona fide travel allowance has not been paid to the employee, the employee is not entitled to rely on the exception from substantiation in section 900-50 of the ITAA 1997.

Bona fide travel allowance

The term 'travel allowance' is defined in subsection 900-30(3) of the ITAA 1997 to be an allowance paid by an employer to cover costs incurred by an employee who is required to travel away from their ordinary residence in the course of their duties and incurs costs for accommodation, food and drink, or expenses incidental to that travel.

TR 2004/6 specifies that for an allowance to be considered a bona fide travel allowance the amount paid:

1. must be paid as an allowance, and

2. must be an amount that could reasonably be expected to cover (where applicable) accommodation for domestic travel, food and drink, or expenses incidental to the travel.

Although there is no requirement for the amount paid to an employee as a travel allowance to equate dollar for dollar to the employee's actual expenditure, 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 (Paragraph 86 of TR 2004/6).

In this case, and for the following reasons, we consider there is no relativity between the quantum of the meal allowance you are paid and the purpose for which it is said to be paid:

1. Notwithstanding the fact that the allowance paid does not have to equate dollar for dollar to the amount expended, your meal allowance equates to about 50% of what the Commissioner considers to be the reasonable amount for the cost of three meals a day at the locations you worked at in the 2013 financial year. Accordingly, it cannot be said there was any relativity between the quantum of the meal allowance and the purpose for which it was paid.

2. The unsubstantiated deduction you wish to claim for meals and incidental expenses associated with your work related travel equates to an amount approximately three times the amount of the daily meal allowance you are paid which adds further weight to the conclusion that there is no relativity between the quantum of the meal allowance paid to you and the purpose for which it was paid.

Considering the above, the daily meal allowance paid to you cannot be said to be an amount that could reasonably be expected to cover the cost of three meals a day at the locations you were required to travel to and stay at for work purposes and cannot therefore qualify as a bona fide travel allowance.

Conclusion

The meal allowance you were paid in the 2013 financial year was not a bona fide travel allowance. Accordingly, you are not entitled to rely on the exception from substantiation to claim deductions for any costs incurred for food and incidental costs associated with your travel away from home for work purposes.

Any deduction you claim for such expenses will need to be substantiated in accordance with the requirements set down in Subdivision 900-B of the ITAA 1997, and Division 900 of the ITAA 1997 more generally.