Private ruling: Meal and incidental expenses
Date of advice: 12 August 2016
Published: September 2016
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to a deduction for your meal and incidental expenses? | A1: No.

Relevant facts and circumstances: You are employed as a contract worker overseas. Your employment contractual obligations required you to reside at specific accommodation providers for the entire duration of each contract. You incurred expenses for meals and incidentals while overseas.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1

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. Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example unless one arrives at work it is not possible to derive income. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income. Rather, the expenses are incurred to enable the taxpayer to commence income earning activities ( Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166). Generally meal and incidental expenses incurred by a person, who lives away from home in order to carry out employment duties at the place of employment, will not be deductible. Expenses of this nature are private, or incurred before or after the activity of earning assessable income. The distance from home does not alter the essential character of any accommodation expenses incurred as they remain private in nature. An exception to this is where you are undertaking work related travel and are required to stay away overnight. However, no deduction is allowable if a taxpayer is merely staying close to their usual work location. Where a person is contracted to a new place for work, the new place is regarded as their normal place of work. The associated meal and incidental expenses incurred are not related to the actual performance of their duties. That is, they are not expenses incurred in the course of gaining or producing that income. Even though the expenditure had a causal connection with the earning of income, the expenditure is inherently of a private or domestic nature. The issue of expenses incurred in relation to meals and incidentals near the work place while maintaining a family residence in another location has been considered by the courts on a number of occasions. In FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 the Federal Court disallowed a forest worker's deduction for the cost of maintaining a caravan and other living expenses. The taxpayer incurred the expenses in providing temporary accommodation at the base camp because the taxpayer had chosen to reside at a place far from the worksite. These expenses were dictated not by work but by private considerations. In this case, the taxpayer's meals, accommodation (running and depreciation expenses associated with the caravan, plus interest paid on the loan used to acquire the caravan) and incidental expenses do not have a sufficient connection with his income producing activities. The extra expenses of food and accommodation are considered to be of a private and domestic nature as the taxpayer chooses the location of their normal place of residence. Accordingly, a deduction for the cost of meals, accommodation and incidental expenses is not allowable. Your circumstances are considered to be comparable to those in Toms' case. While we acknowledge that your workplace is overseas, and there are restrictions placed around your accommodation, it is considered that your location overseas is your normal place of work. Consequently, any meal and incidental expenses you may incur are considered to be private in nature. Also, these expenses will be incurred to put yourself in a position to perform your duties and not in the actual performance of those duties. Therefore, these expenses are not deductible under section 8-1 of the ITAA 1997.