Edited version of your written advice

Authorisation Number: 1012673014043

Ruling

Subject: Meals and incidentals

Question 1

Can you claim a deduction for the amount for meals and incidentals you incurred without substantiation if you declare the allowance you received as assessable income in the 2012-13 financial year?

Answer

No.

Question 2

Can you claim a deduction for the amount for meals and incidentals you incurred without substantiation if you declare the allowance you received as assessable income in the 2013-14 and 2014-05 financial years?

Answer

Yes.

This ruling applies for the following periods

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

The scheme commenced on

1 July 2012

Relevant facts

You are an employee.

During the 2012-13 financial year, your employer paid you a per diem amount per day for each day you were required to sleep away from home for work purposes.

The per diem amount increased in the 2013-14 financial year.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 900-30

Income Tax Assessment Act 1997 Section 900-50

Reasons for decision

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 the course of gaining or producing assessable income, but are not allowable to the extent that they are of a capital, private or domestic nature.

Meal expenses are normally private or domestic in character. However, where a taxpayer is away from home overnight in connection with an income producing activity, meal expenses are deductible. The expenditure is not considered private because its occasion is the taxpayer's travel away from home on income producing activities.

As a general rule, written evidence is required to substantiate any expense you wish to claim as a deduction.

Section 900-50 of the ITAA 1997 provides that the substantiation requirement to obtain written evidence does not apply to claims by employee taxpayers for expenses covered by a bona fide travel allowance if the amount of the claim for expenses incurred does not exceed the amount the Commissioner considers reasonable (Taxation Determination TD 2012/17 Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2012-13 income year?. TD 2013/16 applies to the 2013-14 financial year and TD 2014/19 applies to the 2014-15 financial year). The allowance must be paid to cover work-related travel expenses incurred for travel away from the employee's ordinary residence, undertaken in the course of performing duties as an employee (subsection 900-30(3) of the ITAA 1997) and which involves sleep away from home. The work-related travel expenses must be for accommodation, or food or drink, or expenses incidental to the travel.

TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses states at paragraph 12 that unless the following exception applies, all allowances must be shown as assessable income in the employee's tax return. However where:

• the allowance received is a bona fide travel allowance

• the allowance received does not exceed the reasonable amount; and

• the allowance has been fully expended on deductible expenses,

the allowance received is not required to be shown as assessable income in the employee's tax return. Where the allowance is not required to be shown as assessable income in an employee's tax return, and is not shown, a deduction for the expense cannot be claimed in the tax return. However, if you do declare the allowance as assessable income, you can claim a deduction.

To be a bona fide travel allowance the amount paid must be an amount that could reasonably be expected to cover accommodation, or meals or expenses incidental to the travel.

In your case, during the 2012-13 financial year you were paid a per diem for meals and incidentals.

The allowance you receive is not considered to be an amount that could reasonably be expected to cover meals and incidentals. The allowance is therefore, not considered to be a bona fide travel allowance. Consequently, you cannot rely on the relief from substantiation provisions in the 2012-13 financial year.

However, for the 2013-14 and 2014-15 financial years, you receive a per diem per day for meals and incidentals. It is considered that the amount you receive could reasonably be expected to cover meals and incidentals. It is therefore, considered to be a bona fide travel allowance.

Consequently, provided that you declare the allowance you receive, you are able to rely on the relief from substantiation provisions to claim for expenses you actually incur up to the reasonable allowance amounts provided by the Commissioner for the 2013-14 and 2014-15 financial years.