Edited version of your written advice

Authorisation Number: 1012729985522

Ruling

Subject: Meals and incidentals

Question

Can you claim a deduction for meal and incidental expenses you incur up to the reasonable allowance amount without substantiation if you include the allowance you receive as assessable income?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2014

The scheme commenced on

1 July 2013

Relevant facts

You are a full time employee.

You were required to work away from home for a number of days during the 2013-14 financial year.

You were paid an allowance for meals and incidentals.

Your employer paid you the allowance based on the ATO reasonable allowance amounts but did not increase the amounts at the beginning of the financial year. This means that in the first part of the financial year, you were paid at the rate allowable for the previous financial year.

You incurred expenses of at least the amount you received as an allowance.

The allowance you receive is not included on your PAYG either as an allowance or as part of the gross amount.

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 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.

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 or food or 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 travel allowance to cover food and drink and the expenses do not exceed amounts the Commissioner deems reasonable.

Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses 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 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.

In your case it is accepted you received a bona fide travel allowance to cover meals and incidentals while working away from home and the allowance did not exceed the reasonable amount.

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