Edited version of your written advice

Authorisation Number: 1012667494440

Ruling

Subject: Travel allowance

Question 1

When you travel away from home overnight on work are you entitled to claim the meal expenses you actually incur, without substantiation, for the period you are in receipt of a travel allowance where the amount incurred is less than the reasonable amount?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 2014

Year ended 30 June 2015

Year ended 30 June 2016

Year ended 30 June 2017

Year ended 30 June 2018

The scheme commences on:

1 July 2013

Relevant facts and circumstances

You are an employee who frequently travels.

You receive a travel allowance based on your employment agreement.

The travel allowance is received for specific instances of travel.

You begin to receive an allowance when you arrive at your destination.

You generally spend at least the amount of the allowance received.

The allowance is included in your payment summary as a travel allowance.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for a loss and outgoing to the extent that it is incurred in gaining or producing assessable income. However, a loss or outgoing is not deductible if it is of a capital, private or domestic nature, or it is incurred in gaining or producing exempt income.

The cost of meals is normally considered to be a private expense and is not an allowable deduction under section 8-1 of the ITAA 1997. However, where you are required to sleep away from home in the performance of your duties, expenditure on food and drink is considered to have been necessarily incurred in the performance of your duties and a deduction is allowable.

In addition to the above, most work related travel expenses must also satisfy the substantiation requirements of Division 900 of the ITAA 1997.

However, section 900-55 of the ITAA 1997 provides an exception to this substantiation requirement where a travel allowance is received for overseas travel expenses. If a travel allowance is received and the amount of the claim for expenses is no more than the reasonable amount, as determined by the Commissioner, substantiation is not required.

The Commissioner's view on how the exception from substantiation rule for travel expenses should be applied is set out in Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses. For travel allowance expenses to be considered for exception from substantiation the employee must be paid a bona fide travel allowance and the amount must be included in assessable income. A travel allowance that is not paid or payable to cover specific work related travel is not considered a travel allowance for the purposes of the exception from substantiation. For example, a fixed annual travel allowance amount, paid regardless of how often travel is actually undertaken, would not qualify for the exception from substantiation.

TR 2004/6 explains that an expense must be actually incurred as required by section 8-1 of the ITAA 1997, before a claim can be made. You cannot automatically claim a deduction just because you receive an allowance.

TR 2004/6 further states at paragraph 16 that where a taxpayer receives a bona fide travel allowance and incurs deductible expenses in relation to it:

• Where the deduction claimed is more than the reasonable amount, the whole claim must be substantiated with written evidence.

• Where the allowance paid by the employer is greater than the reasonable amount the taxpayer may still use the exception from substantiation if the claim for deduction is not greater than the reasonable amount. In that case the allowance must be shown as assessable income and written evidence is not required to support the claim.

• Where the deductible expense is less than the allowance received, the taxpayer must show the allowance as assessable income in the tax return, and only claim the amount of the deductible expenses incurred.

Relief from substantiation is only available when it is applied against a travel allowance received. Therefore if you do not receive a travel allowance until mid-way through your travel, you can only claim deductions without substantiation from the time when you begin to receive the allowance. Similarly, substantiation relief is no longer available once you cease to receive a travel allowance. For example, if you begin to travel in the morning but do not begin to receive an allowance until you arrive at your destination at night, the substantiation relief is not available until night time when the allowance is received.

In your case, you received a travel allowance from your employer for each night you were required to sleep away from home. It is accepted that the allowance is a bona fide travel allowance. Therefore, you are entitled to claim a deduction for the actual expenses you incur, without substantiation, up to the Commissioner's reasonable travel amount, for the period you receive an allowance, where you include the travel allowance as assessable income and the expenses are actually incurred against the allowance

Note

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 and that the expense was actually incurred. That is, you must have a reasonable basis for determining the amount you incurred.