Edited version of your written advice

Authorisation Number: 1012789943000

Ruling

Subject: Travel expenses

Question 1

Are you entitled to a deduction for meal and incidental expenses?

Answer

No.

Question 2

Is the allowance you receive for meals and incidentals considered to be a travel allowance?

Answer

No.

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 based in City A.

You perform your duties in City B.

You work on a fly in fly out arrangement.

Your employer provides flights from City A to City B return and they also provide accommodation.

You perform your duties each day before returning to your accommodation.

You are required to take your meals to work each day with you.

You receive an allowance for your meals and incidentals.

The allowance is included in your Gross Earnings on the payslip and is not separated as an allowance on your payment summary.

The agreement covering your employment position stipulates that each employee will be entitled to the allowance and is paid in lieu of any claims for food and incidentals while on duty.

You are responsible for your own meal preparation and laundry arrangements.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Meals

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.

As a general rule, expenditure on meals and accommodation while working away from home is not allowed as a deduction. These costs are essentially 'living expenses' of a private or domestic nature. The fact that income cannot be earned unless certain expenses are necessarily incurred is not determinative of deductibility. Expenses incurred to put a taxpayer in a position to earn assessable income (for example, for travel to work) are not incurred in the course of earning assessable income and are therefore not deductible.

In FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 (Toms case) the Federal Court disallowed a forest worker's deduction for the cost of maintaining a caravan and other living expenses. The taxpayer incurred the expenses in providing temporary accommodation at the base camp because the taxpayer had chosen to reside at a place far from the worksite. These expenses were dictated not by work but by private considerations.

The situation where a taxpayer lives and works away from home because their home is located far from where they work (such as in Toms case) is different to that where a taxpayer has to travel 'on' work because their actual employment duties require them to travel (for example, a travelling salesperson or an interstate truck driver).

In the first situation, the taxpayer is only travelling because of the distance they have chosen to live away from where they work.

In the second situation, the taxpayer would be required to travel no matter where they chose to reside because it is their employment duties that has made the travel necessary. Meal and incidental expenses incurred while a taxpayer is travelling 'on' work away from home overnight are allowable deductions because they are considered to be incurred in fulfilling the taxpayer's employment duties.

In your case, you are not travelling 'on' work. Your travel between City A and City B is only required because of your choice of where you live and where you work rather then it being a part of your employment duties. If you had chosen to live in City B then the travel would not be required.

As you are not travelling 'on' work, your meal and incidental expenses are not incurred in earning your assessable income; rather they retain their private nature and consequently are not deductible.

Allowance

Section 15-2 of the ITAA 1997 states that your assessable income includes the value to you of all allowances, gratuities, compensation, benefits, bonuses and premiums provided to you in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by you.

Subsection 900-30(3) of the ITAA 1997 states that a travel allowance is an allowance your employer pays or is to pay to you to cover losses or outgoings that you incur for travel away from your ordinary residence that you undertake in the course of your duties as an employee and that are losses or outgoings for accommodation or for food or drink or are incidental to the travel. That is, a travel allowance is paid to an employee who is travelling 'on' work.

As you are not travelling 'on' work, your allowance is not a travel allowance. As TD 2013/16 and TR 2004/6 only apply to travel allowances, they are not applicable to your situation.

Also, as stated in TD 91/174, the mere receipt of an allowance does not automatically entitled an employee to a deduction for expenses incurred in relation to that allowance. The expenses still need to meet the requirements for deductibility under section 8-1 of the ITAA 1997.

In your case, the allowance you receive is assessable income under section 15-2 of the ITAA 1997. However, a deduction is not allowable for your meal and incidental expenses under section 8-1 of the ITAA 1997 as you are not considered to be travelling 'on' work.