Gleeson v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (2013/0763)
Judgment date: 20 December 2013
Date published: 26 November 2014

Summary of decision:
Outlines the ATO's response to this case which concerns whether an employee truck driver was entitled to claim deductions as 'work related expenses' for certain expenses including food and drink he consumed at roadhouses and service stations.

Overview of facts:
During the income year ending 30 June 2011, Mr Gleeson worked as an employee truck driver for three different companies, all of which subsequently went into liquidation. During the period, these employers paid Mr Gleeson an 'allowance' which was calculated on a cents per kilometre travelled rate. | Mr Gleeson claimed deductions for the cost of food and drink consumed by him at roadhouses and service stations along the interstate routes driven by him as a truck driver. He also claimed deductions for other expenses, such as for his mobile phone. | Mr Gleeson did not keep any receipts for his purchases of food and drink. He was relying on the relief from the substantiation provisions in the income tax law on the basis that he was in receipt of a travel allowance. The amounts he claimed for food and drink were based on the Commissioner's reasonable daily rates set out in the Taxation Ruling applicable to that year TR 2010/19. | At audit, the Commissioner determined that the allowance received by Mr Gleeson was not a 'travel allowance' that relieved him from substantiating his expenses and, as he had no documentation for those expenses, the Commissioner denied Mr Gleeson's deductions. The Commissioner was also not satisfied that Mr Gleeson's employers required him to sleep away from home for as many nights as Mr Gleeson claimed. | Issues decided by the AAT | The Tribunal found that as Mr Gleeson incurred the expenses in relation to food and drink while on trips away from home, it followed that he was entitled to claim a deduction for those expenses. | The Tribunal also concluded that Mr Gleeson received a travel allowance. It was noted that Mr Gleeson was paid for every kilometre that he drove 'because he was virtually always staying away from home'. The Tribunal said, however, that 'regardless of what the allowance was named or how it was calculated, one has to look at the purpose of the payment and the circumstances in which it was paid'. | In this respect, the Tribunal noted that the only evidence of what the allowance was paid for, and which was uncontested, were letters from the payroll manager of the three employers which stated the allowance was paid to Mr Gleeson 'solely for travel allowance'. The Tribunal also noted that the letters vouched for Mr Gleeson working and staying away from home for a significant period throughout the relevant year (about 11 out of 14 nights). | TheTribunal concluded that as it had found that the allowance was a 'travel allowance', Mr Gleeson was entitled to rely on the exception from the substantiation provisions in section 900-50 of the Income Tax Assessment Act 1997 (ITAA 1997) for the relevant year. | The Tribunal noted in the alternative that section 900-200 of the ITAA 1997 would apply in any event as Mr Gleeson had a reasonable expectation that he would not need to substantiate the expenses incurred. This included advice from his tax agent, Mr Gleeson's general understanding of the Commissioner's relevant taxation rulings, and that the payroll manager had told him he was paid 'travel allowances'. | The Tribunal accepted that Mr Gleeson's claim reflected what he was required to pay under the plan he had with his mobile phone carrier. It also accepted that his personal calls were very limited and saw 'no reason to apportion any of his claim for any personal use as it would have been miniscule'.

Issues decided:
The Tribunal found that as Mr Gleeson incurred the expenses in relation to food and drink while on trips away from home, it followed that he was entitled to claim a deduction for those expenses. The Tribunal also concluded that Mr Gleeson received a travel allowance. It was noted that Mr Gleeson was paid for every kilometre that he drove 'because he was virtually always staying away from home'. The Tribunal said, however, that 'regardless of what the allowance was named or how it was calculated, one has to look at the purpose of the payment and the circumstances in which it was paid'. In this respect, the Tribunal noted that the only evidence of what the allowance was paid for, and which was uncontested, were letters from the payroll manager of the three employers which stated the allowance was paid to Mr Gleeson 'solely for travel allowance'. The Tribunal also noted that the letters vouched for Mr Gleeson working and staying away from home for a significant period throughout the relevant year (about 11 out of 14 nights). TheTribunal concluded that as it had found that the allowance was a 'travel allowance', Mr Gleeson was entitled to rely on the exception from the substantiation provisions in section 900-50 of the Income Tax Assessment Act 1997 (ITAA 1997) for the relevant year. The Tribunal noted in the alternative that section 900-200 of the ITAA 1997 would apply in any event as Mr Gleeson had a reasonable expectation that he would not need to substantiate the expenses incurred. This included advice from his tax agent, Mr Gleeson's general understanding of the Commissioner's relevant taxation rulings, and that the payroll manager had told him he was paid 'travel allowances'. The Tribunal accepted that Mr Gleeson's claim reflected what he was required to pay under the plan he had with his mobile phone carrier. It also accepted that his personal calls were very limited and saw 'no reason to apportion any of his claim for any personal use as it would have been miniscule'.

ATO view of decision:
The decision turns on its facts and the Tribunal was entitled to make the findings of fact it did based on the evidence before it. The decision does not present any new principle of law or impact on any of the Commissioner's current published views.

Administrative treatment:
Implications for impacted ATO precedential documents (Public Rulings & Determinations etcetera) | The Commissioner considers that the decision is consistent with the views currently contained in his advice and guidance products dealing with work-related travel expenses and record keeping, including substantiation and the substantiation exception. | The decision supports the Commissioner's long standing view that: • To be deductible, there must be a necessary connection between the expense and the taxpayer's income earning activities. A deduction will be denied if the expense is for an item of a private or domestic nature. The Tribunal agreed that in the absence of a requirement to sleep away from home, a truck driver's expenditure on meals must necessarily be regarded as private in nature (paragraphs 46 to 50). • The allowance must have been received to cover the travel expense and the employee must have also incurred the relevant expense before a deduction will be allowed (paragraphs 46 to 59). • To fall within the exception from substantiation within section 900-50 of the ITAA 1997, the allowance paid must be a 'travel allowance' as defined in the tax law and as explained in TR 2004/6 (paragraphs 51 to 59). | • To be deductible, there must be a necessary connection between the expense and the taxpayer's income earning activities. A deduction will be denied if the expense is for an item of a private or domestic nature. The Tribunal agreed that in the absence of a requirement to sleep away from home, a truck driver's expenditure on meals must necessarily be regarded as private in nature (paragraphs 46 to 50). • The allowance must have been received to cover the travel expense and the employee must have also incurred the relevant expense before a deduction will be allowed (paragraphs 46 to 59). • To fall within the exception from substantiation within section 900-50 of the ITAA 1997, the allowance paid must be a 'travel allowance' as defined in the tax law and as explained in TR 2004/6 (paragraphs 51 to 59). | As noted in our Compliance Program, claims for work-related expenses continue to be an area of focus for our compliance activity. Incorrect claims we have seen range from basic errors, poor record keeping, incorrect advice, and in some instances, deliberately false claims. In relation to employee truck drivers, some areas we have identified where we consider particular care is needed include: | 1. Amounts claimed as travel expenses must have actually been incurred by the employee - compliance activity indicates that some individuals are claiming the Commissioner's reasonable allowance amounts without considering what expenses they actually incurred. | This decision is not authority for the view that individuals are entitled to claim the Commissioner's reasonable amount without considering what expenses were actually incurred. Senior Member Lazanas allowed Mr Gleeson's claims for his meals because she found that he spent 276 days away from his ordinary residence and because she accepted that he had incurred the amounts he claimed to have expended (paragraphs 44, 45 and 50). | Individuals should be mindful that they may be asked for information to support that an amount was expended even if they do receive a travel allowance, for example, where they stayed, and where and what they ate. | 2. The employee must be able to show how he or she calculated the amount claimed - individuals need to be able to show how they calculated the amount claimed. In this case, Mr Gleeson had not kept his log book sheets or other records and his employers had gone into liquidation making it difficult for him to reconstruct and verify the number of nights he spent away from home. From what records could be obtained from his employers, Mr Gleeson's tax agent attempted to reconstruct a worksheet showing the trips that Mr Gleeson would have undertaken in the year. The Tribunal noted the worksheet was incomplete and inaccurate and as a result, it concluded that the worksheet could not be relied on to count the trips that were said to have occurred. Instead, the Tribunal relied on Mr Gleeson's oral testimony and statements from the payroll manager as evidence of the number of nights Mr Gleeson spent away from home. | Care should be taken using secondary documents to calculate nights away from home. This is because while such documents may reflect the number of trips taken, distance travelled, or how often an allowance was paid, they may not show other relevant information such as the number of nights the person was required to spend away from home, or the expenses they incurred as a result. | Implications for Law Administration Practice Statements | N/A

Legislative references: Income Tax Assessment Act 1997 8-1 900-30 900-50 900-200
Case references: Commissioner of Taxation v Cooper (1991) 29 FCR 177 (1991) 21 ATR 1616 91 ATC 4396 Re Fardell and Commissioner of Taxation (2011) 85 ATR 812 2011 ATC 10-208 [2011] AATA 725 Re McIntosh and Federal Commissioner of Taxation (2001) 47 ATR 1242 2001 ATC 2272 [2001] AATA 702 Roads and Traffic Authority of New South Wales v Commissioner of Taxation (1993) 43 FCR 223 (1993) 26 ATR 76 93 ATC 458
Subject references: Taxation and Revenue income tax deductions employee truck driver work-related expenses relief from substantiation decision set aside and substituted