Edited version of your written advice

Authorisation Number: 1012711932979

Ruling

Subject: Meals

Question 1

Are you required to declare the allowance you receive if you wish to claim a deduction for meals and incidentals?

Answer

Yes.

Question 2

Can you claim a deduction for the reasonable allowance amount for meals and incidentals without substantiation if you spend less than the reasonable allowance amount?

Answer

No.

Question 3

Can you claim a deduction for meals and incidentals up to the reasonable allowance amount without substantiation if you have expended at least that amount?

Answer

Yes.

This ruling applies for the following period

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 commenced on

1 July 2013

Relevant facts

You are a professional.

You are required to sleep away from home overnight.

Your employer pays you an allowance for each meal and incidentals while you are away from home overnight.

The amount you receive is substantially less than your actual expenses.

The allowance you receive is different for each country you are in and paid in that country's currency. The amount you receive can range between slightly more and slightly less than AUD$100.

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.

Taxation Ruling TR 95/19: Income tax: airline industry employees - allowances, reimbursements and work-related deductions (TR 95/19) provides the Commissioner's view on allowances and work-related deductions for airline industry employees. Paragraph 21 states that a deduction is only allowable if an expense:

• Is actually incurred;

• Meets the deductibility tests; and

• Satisfies the substantiation rules.

You cannot automatically claim a deduction because you receive an allowance.

Accordingly, before considering the application of the substantiation provisions to a travel allowance expense it is a prerequisite that the expense is both incurred and deductible under another provision of the ITAA 1997 outside Division 900 (see subsection 900-15(1)).

TR 95/19 states at paragraph 25 that the expense must actually be incurred by the airline employee to be considered for deductibility. 

"Incurred" is not defined in the taxation legislation. In general terms, an outgoing is incurred at the time a taxpayer owes a present money debt that the taxpayer cannot escape.

In McIntosh v. FC of T [2001] AATA 702; (2001) 47 ATR 1242; 2001 ATC 2272, the Administrative Appeals Tribunal has held that a taxpayer is entitled to claim a deduction only for the expenditure actually incurred rather than for the whole of the amount considered reasonable by the Commissioner.

In Fardell v. Federal Commissioner of Taxation [2011] AATA 725; 2011 ATC 10-208 an employee truck driver was denied deductions for travel expenses calculated using the reasonable amounts for each year. In denying the deductions the Tribunal stated:

The evidence before the Tribunal sets out in the clearest possible terms that the Deductions were claimed simply and purely on an arithmetical basis [paragraph 14].   

It is significant that the Applicant has not been able to produce any evidence by way of substantiation of his meals expenditure.                 … the Tribunal accepts that during the relevant years the Applicant did expend some amounts on meals consumed while driving his vehicle but at the same time the Tribunal cannot form any view as to how much was expended and when it was expended. It is hardly necessary to make the point that the Applicant bears the onus [paragraph 35].

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 2013/16 Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2013-14 income 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.

If you rely on the 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 it was for work-related purposes. What counts as evidence for a claim subject to the substantiation exception will vary according to individual circumstances and the nature of the expense.

In your case, you receive an allowance for meals and incidentals for each occasion you are away from home overnight and the meals are not provided to you inflight. The allowance you receive is considered to be a bona fide travel allowance.

Therefore, as you receive a bona fide allowance for meals and incidentals, you are entitled to a deduction for the amount you incur, up to the reasonable allowance amount without substantiation if you declare the allowance you receive.