Edited version of your written advice

Authorisation Number: 1012929720672

Date of advice: 18 December 2015

Ruling

Subject: Work related expenses

Question 1

Are you entitled to claim a deduction up to the Commissioner's reasonable travel amount, without written evidence, where you include the travel allowance as assessable income and the expenses are actually incurred?

Answer

Yes.

Question 2

Are you allowed to claim a deduction for the reasonable amount if it is more than your actual expenses?

Answer

No, you are only allowed to claim the amount of expenses you actually incurred.

This ruling applies for the following period

Year ending 30 June 20XX

The scheme commenced on

1 July 20XX

Relevant facts

You are required to travel overnight numerous times during the financial year.

Your employer provided you with a meal allowance for each trip.

The allowance was identifiable on your weekly pay advice and was not paid as an unspecified part or your normal salary.

Your employer did not declare the allowance paid as it was below the ATO reasonable amount.

The travel allowance was not included on Your PAYG Payment Summary.

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

Summary

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

Detailed reasoning

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.

In respect to travel expenses, where employees are required to sleep away from home as part of their employment duties, a deduction for meals and accommodation may be allowable.

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, food, 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 900-50 of the ITAA 1997 states an exception to this rule applies if you receive a bona fide travel allowance to cover accommodation, food or drink and the expenses do not exceed amounts the Commissioner deems reasonable. A bona fide travel allowance is an amount that could reasonably be expected to cover accommodation, food, drink or expenses incidental to travel. This does not require that the amount paid by the employer must equate dollar for dollar to the employee's actual expenditure. Taxation Determination TD 2014/19 provides the Commissioner's reasonable amounts for the 2014-15 year of income.

Taxation Ruling TR 2004/6 discusses the conditions when this substantiation exception applies. Where the allowance paid is less than the 'reasonable amount', you can claim the difference provided you have actually incurred the expense. However to be entitled to claim a deduction for these additional travel expenses, you must declare the amount of travel allowances received as assessable income.

Note that 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.

In your case, you receive a travel allowance from your employer when you are required to stay overnight at various locations both within Australia and overseas. This allowance is paid to cover your food, drink and incidental expenses incurred as a result of this travel. It is accepted that the allowance is a bona fide travel allowance.

However, the travel allowance that you receive from your employer is not included in your payment summary. To be entitled to claim these additional expenses that you incur, this amount must be included in your assessable income.

Therefore, you are entitled to claim a deduction up to the Commissioner's reasonable travel amount, without written evidence, where you include the travel allowance as assessable income and the expenses are actually incurred. As discussed previously, although the expenses are excluded from the substantiation rules, you may still be asked how you worked out your claim, that is, how you worked out how much you actually expended.