Private ruling: Travel expenses
Date of advice: 18 April 2018
Published: July 2018
Ruling period: Year ending 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Is the allowance you are paid considered a bona fide travel allowance? | A1: No. | Q2: Are you entitled to claim a deduction for your travel expenses? | A2: No.

Relevant facts and circumstances: You are employed as a X with the conditions listed in the Employment Agreement 2012 (the agreement). The agreement includes a Corporate Travel Procedure (the procedure). As part of your duties, you were on occasion required to work both interstate and overseas. Your payment summary and payslips do not show allowances that you have received from your employer.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 15-2 | Income Tax Assessment Act 1997 section 900-30 | Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 900-50 | Income Tax Assessment Act 1997 subdivision 900-B | Fringe Benefit Tax Assessment Act 1986 | Fringe Benefit Tax Assessment Act 1986 Section 30

Reasons for decision: Summary: An expense is deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) if and to the extent to which it is incurred in gaining or producing your assessable income or in carrying on a business for that purpose. However you cannot claim a deduction for an expense that is of a capital, private or domestic nature. A deduction is only allowable if an expense: ● is actually incurred ● meets the deductibility tests ● satisfies the substantiation rules. | Detailed Reasoning - Allowances: 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. An allowance is usually paid to a person who is travelling in the course of carrying out their duties to meet additional expenses. The expenses of travelling may be an allowable deduction if the allowance is assessable to the recipient. An allowance, as stated in Taxation Ruling TR 92/15 Income tax and fringe benefits tax: the difference between an allowance and a reimbursement , is a payment of a predetermined amount to cover an estimated expense. Unless it is a benefit that is subject to Fringe Benefits Tax in accordance to the Fringe Benefits Tax Assessment Act 1986 (FBTAA), an allowance paid by an employer to their employee falls within the definition of salary and wages and is assessable income under section 6-5 of the ITAA 1997. Paragraph 14 of Draft Taxation Ruling TR 2017/D6 Income tax and fringe benefits tax: when are deductions allowed for employees' travel expenses states an employee is not entitled to deduct an expense simply because they receive an allowance, including expenses the allowance is intended to cover. The nature of the expense and its connection to the income producing activities determines whether it is deductible. Whilst allowances paid by employers under relevant Awards are intended to compensate expenses that may be related to meals and accommodation, the circumstances in which those allowances are paid are essentially different. Allowances may be paid as a travel allowance or paid under other names. | Detailed Reasoning - Travel Allowance: Payment of a travel allowance tends to indicate that travel is a necessary element of the employment. A travel allowance is defined in section 900-30 of the ITAA 1997 as 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. Travel allowances are often paid to cover specific expenses such as accommodation, food or drink or incidentals to travel away from the employees’ ordinary residence, undertaken in the course of performing duties and involve sleep away from home. Furthermore, there is generally no change of employment location and therefore no change of residence. The employee simply travels in order to carry out the requirements of the job. The allowance forms part of the employees’ assessable income against which appropriate deductions may be allowed for the cost of meals, accommodation and incidental expenses incurred while the employee is travelling. | Detailed Reasoning - Substantiation: Under subdivision 900-B of the ITAA 1997, a deduction is not allowable for a work expense, unless the expense qualifies as a deduction under a provision of the Act and written evidence of the expense has been obtained and retained by the employee taxpayer. For the substantiation exception to apply, the allowance must be a bona fide travel allowance. Where such an allowance is received by an employee, he or she is eligible to make a claim to the extent of the reasonable amounts set by the Commissioner in respect of accommodation, or meals or expenses incidental to the travel. Paragraph 18 of Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses, states that for domestic or overseas travel allowance expenses to be considered for exception from substantiation, 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 employee’s ordinary residence, undertaken in the course of performing duties as an employee and which involves sleep away from home. Paragraph 33 of TR 2004/6 states the Commissioner determines the reasonable amount of travel and meal allowance expenses only for the purpose of the tax law. That is, the amount that will be accepted as an exception from the requirement to obtain and keep written evidence for substantiation purposes. Paragraph 39 of TR 2004/6 states a taxpayer may still be required to show the basis for determining the amount of their claim and that the expenses were actually incurred for work-related purposes. What counts as evidence for a claim subject to the substantiation exception will vary according to individual circumstances and the nature of the expense. Taxation Ruling TR 2004/6 provides guidance on the substantiation exceptions. Paragraph 35 states that a deduction is not allowable for a work expense, unless the expense qualifies as a deduction under a provision of the ITAA 1997 AND written evidence of the expense has been obtained and retained. There is however an exception (paragraph 38). If the travel allowance qualifies for an exception, it is not necessary to keep written evidence. To qualify for this exception, the travel allowance: ● must be for sleeping away from home ● must cover the cost of accommodation, food or drink, or incidentals ● must cover specific journeys ● must be paid as an allowance ● must be for a bona fide travel allowance. Paragraphs 60 and 61 explains further: 60. For the substantiation exception to apply, the allowance must be a bona fide travel allowance. That is, the amount paid must be an amount that could reasonably be expected to cover accommodation, or meals or expenses incidental to the travel. 61. A token amount of allowance, for example $5 per day to cover meals for travel that involves sleeping away from home, would not be considered a payment that is expected to cover the purchase of three meals per day while travelling for work. The payment would not be considered a travel allowance for the purposes of the exception from substantiation. In your case, your allowance is not present on your payslips or your PAYG summary. There is not sufficient information to show that your per diem allowance is a bona fide travel allowance. Furthermore there are no details of your travel or what expenses you have actually incurred. Therefore the substantiate exemption does not apply in your circumstances. There is not enough information to show you are entitled to a deduction for your travel expenses.