Edited version of your written advice

Authorisation Number: 1013085248510

Date of advice: 6 September 2016

Ruling

Subject: Work Related Expenses - Travel - Substantiation exception travel expenses

Question 1

Is the taxpayer entitled to claim the reasonable travel allowance amount for the 20XX-20XX income year?

Answer

No

This ruling applies for the following periods:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You travelled to overseas during the financial year 20XX as required by your employer. Dates of travel were from month 20XX to month 20XX.

Travel occurred to allow you to participate in a "project work and preparation for a conference".

You did not receive travel allowance from your employer.

PAYG summary did not show any travel allowance received.

You did not keep any receipts for food, drink or accommodation.

You maintained a Travel diary showing the daily activities throughout the trip.

Relevant legislative provisions

Income Tax Assessment Act 1997 - Section 8-1

Income Tax Assessment Act 1997 Section 900-10

Income Tax Assessment Act 1997 Section 900-50

Income Tax Assessment Act 1997 Section 900-55

Income Tax Assessment Act 1997 Section 900-80

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.

A deduction is only allowable if an expense:

• is actually incurred,

• meets the deductibility tests and

• satisfies the substantiation rules.

Section 900-10 of the ITAA 1997 requires the taxpayer to substantiate the expenses and provide written evidence and travel records. Division 900 of the ITAA 1997 sets out the substantiation requirements when claiming expenses but also provides some exceptions available for certain work related expenses.

For overseas travel expenses to be considered for exception from substantiation under section 900-55 of the ITAA 1997, the employee must be paid a bona fide travel allowance. The allowance must be paid to cover work-related travel expenses incurred for travel away from the employees ordinary residence, undertaken in the course of performing duties as an employee (subsection 900-30(3) of the ITAA 1997) and which involves sleeping away from home. The work-related travel expenses must be for accommodation, or food or drink, or expenses incidental to the travel. 

A travel record is a record of activities undertaken during the travel. It is not a record of expenses incurred during the travel. The purpose of a travel record is to show what activities were undertaken in the course of producing assessable income, so that expenses or portions of those expenses can be attributed to those income-earning activities. 

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

Paragraph 12 states, that unless the following exception applies, all allowances must be shown as assessable income in the employee's tax return. However where:

• the allowance is not shown on the employee's payment summary;

• the allowance received is a bona fide overtime meal allowance or 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 the employee's tax return, and is not shown, a deduction for the expense cannot be claimed in the tax return.

Paragraph 59 states that an amount for travel expenses that has been folded-in as part of normal salary/wages, for example under a workplace agreement, is not considered to be an allowance. If an allowance has been folded-in as part of normal salary/wages the exception from substantiation contain in this ruling does not apply. The necessary written evidence must be kept to support claims for deductible expenses incurred.

Application to your circumstances

You were not paid a bona fide travel allowance from your employer therefore you cannot claim travel expenses for the 20XX income year.

Your PAYG summary does not show travel allowance, where income is not reported in your tax return, a deduction for expenses cannot be claimed.

Under Taxation Ruling 2004/06 if an allowance has been folded-in as part of normal salary/wages exception from substantiation does not apply you need to support any claim with receipts for food, drink or accommodation which you have stated you do not have.

Whilst you do have a travel diary this only supports the claim for the period of travel which can be attributed to income-earning activities it is not a record of expenses.