Edited version of your private ruling

Authorisation Number: 1012551756162

Ruling

Subject : Deductions - meals and incidental expenses

Question 1

Are you entitled to a deduction for meal and incidental expenses?

Answer

No.

Question 2

Is the victualling allowance you receive considered to be a travel allowance?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commenced on

1 July 2012

Relevant facts

Your usual residential home is in City A.

You were employed to work on a project in City B between certain month 2012 and certain month 2013.

Your employer paid for your accommodation in City B but did not pay you for meals.

You reside in City B for your xx day rotations before returning to City A.

Your employer paid you a victualling allowance of $59.06 per day you worked. The allowance is included on your PAYG summary as an assessable allowance.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Meals

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.

As a general rule, expenditure on meals and accommodation while working away from home is not allowed as a deduction. These costs are essentially 'living expenses' of a private or domestic nature. The fact that income cannot be earned unless certain expenses are necessarily incurred is not determinative of deductibility.

Where it has been established that a property used to accommodate a taxpayer amounts to a second residence, the Courts and the Administrative Appeals Tribunal have consistently held that the essential character of the expenses incurred is of a private or domestic nature unconnected with income-producing activities and, therefore, the expenses are not deductible. The reasoning in these cases is that a taxpayer's choice to establish a residence is not dictated by travel needs, but by considerations of a private or domestic nature. It follows that the required connection between second residence expenses and a taxpayer's income-producing activities is absent.

In FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 the Federal Court disallowed a forest worker's deduction for the cost of maintaining a caravan and other living expenses. The taxpayer incurred the expenses in providing temporary accommodation at the base camp because the taxpayer had chosen to reside at a place far from the worksite. These expenses were dictated not by work but by private considerations.

In your case, it is considered that you established a second residence at a location close to your workplace at City B. Your meal expenses are considered to be of a private and domestic nature. Accordingly, a deduction for these expenses is not allowable either with or without substantiation.

Allowance

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.

Subsection 900-30(3) of the ITAA 1997 states that a travel allowance is an allowance your employer pays or is to pay to you to cover losses or outgoings that you incur for travel away from your ordinary residence that you undertake in the course of your duties as an employee and that are losses or outgoings for accommodation or for food or drink or are incidental to the travel.

As you have established a second residence, you are not considered to be travelling away from your ordinary residence. As such, while the allowance you receive is assessable, it is not considered to be a travel allowance.