Edited version of private advice

Authorisation Number: 1012633586497

Ruling

Subject: Work related expenses

Question 1

Are you entitled to claim a deduction up to the Commissioner's reasonable travel amounts, without written evidence, where you include the travel allowance as assessable income and the expenses are actually incurred?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 2012

Year ended 30 June 2013

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

The scheme commences on:

1 July 2011

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are an international worker.

You are required to travel internationally numerous times per month.

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

The amount provided is always lower than the Commissioner's reasonable travel amount for the country it is received in.

This allowance is not reflected on your payment summary at the end of the financial year.

The allowance that you receive does not cover all of your travel expenses.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Income Tax Assessment Act 1997 Subdivision 900-B.

Reasons for decision

Summary

You are entitled to claim a deduction up to the Commissioner's reasonable travel amount, without written evidence, where you include the travel allowance as assessable income and the expenses are actually incurred.

Detailed reasoning

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.

In respect to travel expenses, where employees are required to sleep away from home as part of their employment duties, a deduction for meals and accommodation may be allowable.

Section 900-30 of the ITAA 1997 states that travel allowance expenses are work expenses if they are incurred for travel, 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, food, drink or incidental expenses when travelling in the course of your duties as an employee.

As a general rule, written evidence is required to substantiate any expense you wish to claim as a deduction (for example, receipts or invoices of the expense).

Section 900-55 of the ITAA 1997 states an exception to this rule applies if you receive a bona fide overseas travel allowance to cover food or drink and the expenses do not exceed amounts the Commissioner deems reasonable. A bona fide travel allowance is an amount that could reasonably be expected to cover food, drink 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.

Taxation Ruling TR 2004/6 discusses the conditions when this substantiation exception applies. Where the allowance paid is less than the 'reasonable amount', you can claim the difference provided you have actually incurred the expense. However to be entitled to claim a deduction for these additional travel expenses, you must declare the amount of travel allowances received as assessable income.

Note that 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.

In your case, you receive an allowance from your employer when you are required to travel overseas. This allowance is paid to cover your meal and incidental expenses incurred as a result of this travel. It is accepted that the allowance is a bona fide travel allowance.

However, the allowance that you receive from your employer is not included in your payment summary. To be entitled to claim the additional expenses that you incur, this amount must be included in your assessable income.

If you have spent in excess of the reasonable allowance amount on meals, you are entitled to claim a deduction of the reasonable allowance amount, without substantiation, for each night that you were required to sleep away from home on work related purposes.

If you have spent less than the reasonable allowance on meals, you are entitled to claim a deduction for the amount that you actually spent on meals without substantiation.

If the deduction claimed is more than the reasonable amount, the whole claim must be substantiated, not just the excess over the reasonable amount.

Even where you rely on the above exception from substantiation, you may still be required to show the basis for determining the amount of your claim, that the expense was actually incurred and that the expense was work related. That is, you must have a reasonable basis for determining the amount you incurred.

Therefore, you are entitled to claim a deduction up to the Commissioner's reasonable travel amount, without written evidence, where you include the travel allowance as assessable income and the expenses are actually incurred.