Private ruling: Travel expenses
Published: December 2013
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to a deduction for meal expenses equal to the Commissioner's reasonable allowance amounts without substantiation? | A1: No. | Q2: Are you entitled to a deduction for meal expenses up to the amount of the allowance paid by your employer without substantiation? | A2: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Section 900-50 | Income Tax Assessment Act 1997 Section 900-55.

Reasons for decision: Summary: 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. Expenditure on the daily necessities of life (for example, food and drink) is generally not deductible as it is not incurred in gaining or producing assessable income and is also considered to be private or domestic in nature. Exceptions to this are where you are undertaking work-related travel and are required to stay away overnight or you work overtime and receive an overtime meal allowance. In your case you are away from home overnight for work and receive an allowance on such occasions. Such an allowance is assessable income. However, the receipt of an allowance does not automatically entitle you to a deduction. The expenses must meet the criteria for deductibility under section 8-1 of the ITAA 1997 as well as meet the substantiation requirements. 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. Subdivision 900-B of the ITAA 1997 provides an exception from the substantiation requirements for domestic and overseas travel allowance expenses. Section 900-50 of the ITAA 1997 provides that you can deduct a travel allowance expense for travel within Australia without getting written evidence or keeping travel records if the Commissioner considers reasonable, the total of the outgoings you claim for travel covered by the allowance. Similarly, section 900-55 of the ITAA 1997 provides that you can deduct a travel allowance expense for travel outside Australia without getting written evidence under the same conditions as for domestic travel allowances, except that you still have to get written evidence for losses or outgoings for accommodation. The exception from substantiation for travel allowance expenses provided by sections 900-50 and 900-55 of the ITAA 1997 will only apply where all three of the following criteria are met: · you received a bona fide travel allowance and the allowance is included in your assessable income, · your claim for travel expenses does not exceed the reasonable amounts set out by the Commissioner for travel allowance expenses, and · you have actually incurred the amount of the expense claimed. Therefore, to establish whether the exception from substantiation of your travel expenses applies in your circumstances, the Commissioner needs to be satisfied that you have actually incurred the expense to be claimed. Taxation Ruling TR 2004/6 discusses the conditions when the substantiation exception for travel allowance expenses applies. As highlighted in paragraph 11 of TR 2004/6, an expense must be actually incurred before a claim can be made. That is, for travel allowance expenses to be considered for the exception from substantiation, the employee must actually incur the work related expenses. Paragraphs 14 and 15 states that a taxpayer can decide between maintaining fewer records and limiting a claim to the reasonable amount or keeping written evidence and claiming the full amount of deductible expenses incurred. If a taxpayer relies on the exception from substantiation, they may still be required to show the basis for determining the amount of their claim, that the amount was actually incurred and that it was for work related purposes. Paragraph 32 of TR 2004/6 states that it is a requirement of the law that, before the exception from substantiation can apply, the losses or outgoings must be deductible under some provision of the ITAA 1997. In your case, you were paid an allowance when you were away from home overnight for work. The allowance amount received is less than the Commissioner's reasonable amounts as set out in Taxation Determination TD 2011/17 and TD 2012/17. Under your enterprise agreement, your employer pays you an allowance to compensate you for the additional expenses incurred. It is expected that this allowance would cover your work related expenses incurred. The daily amount paid by your employer would normally be expected to cover the cost of three meals. However you are seeking a deduction for almost double this in the 2012-13 income year. When asked for details or evidence to show that you spend more than the allowance paid, little explanation was provided. You advised that it is impractical to keep receipts for meal purchases especially when dining at restaurants with other people. Where the exception from substantiation applies, you can choose to keep fewer records. The exception does not mean you don't keep any records. It also requires you to be able to show the basis for determining the amount of your claim. The Commissioner is not satisfied that you have incurred work related expenses substantially more than the allowance received. You have no basis or reasonable explanation in relation to this additional amount. Furthermore, some of the incidental expenses incurred such as international phone calls to family, other international personal phone calls, toiletries and other personal items are not deductible expenses under section 8-1 of the ITAA 1997 as they are private in nature. The Commissioner accepts that you would incur work related expenses up to the amount of the allowance received from your employer and you therefore can claim a deduction up to this amount without full written evidence of each work related meal and incidental expense. However, as there is no evidence or basis to show that you have actually incurred more than this, you are not entitled to a deduction above the amount of the allowance received without further evidence. Therefore you are not entitled to rely on the exception from the substantiation provisions under sections 900-50 and 900-55 of the ITAA 1997 in regard to your additional travel expenses.

Relevant facts: The arrangement that is the subject of the Ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are: | · the application for private ruling, | · additional information including details of your daily travelling allowance as outlined in your employment agreement and | · additional information including pay advice and meal dockets from your employer. | You are an employee who travels away from home and is required to sleep away from home. | Your employer pays you a daily travel allowance as outlined in the industrial enterprise agreement when you travel away from home overnight for work. The allowance compensates you for additional incidental expenses incurred at a higher cost than would normally be the case. You are also paid a meal allowance. | Your employer only pays an allowance for the time spent at the hotel. | Incidentals incurred whilst away include dry cleaning and washing, international phone calls to your employer regarding roster changes and briefings, international phone calls to family and for personal business matters, transport to restaurants at meal times as well as toiletries and other personal items. | You spend all and often more than the allowance paid. | You wish to claim a deduction substantially more than the allowance received. | You do not have receipts for your meal expenses. | When asked for evidence such as credit card statements to show that you would have incurred more than the allowance paid, none was provided. | You advise it is impractical to keep receipts for meal purchases especially when dining at restaurants with other people and you can not get a split bill.