Private ruling: Travel expenses
Published: January 2015
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for your travel expenses based on the reasonable travel amounts? | A1: No. | Q2: Are you entitled to a deduction for your substantiated work related travel expenses incurred? | A2: Yes.

Relevant facts and circumstances: You are a professional. You travelled overseas to do work related activities. You received a grant however the amount received did not cover your living expenses while overseas. You have kept a travel diary, however you found it hard to keep all receipts for your accommodation, travel and meal expenses.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Section 900-30 | Income Tax Assessment Act 1997 Section 900-55 | Income Tax Assessment Act 1997 Section 900-115.

Reasons for decision: Detailed Reasoning - Allowable deductions: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which these 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. The receipt of an allowance does not mean that a deduction is automatically allowed. The expenses must meet the criteria for deductibility under section 8-1 of the ITAA 1997 as well as the substantiation provisions. Expenditure on the daily necessities of life (for example, accommodation, 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 include where you are undertaking work-related travel and are required to stay away overnight. In your case you are away from home for several days for work related purposes. The cost of your accommodation and meals incurred in the course of your work-related travel away from home meet the deductibility tests. It is therefore necessary to consider the substantiation requirements. | Detailed Reasoning - Substantiation: 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 overseas travel allowance expenses. 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 section 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, • 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. Subsection 900-30(3) of the ITAA 1997 states that a travel allowance is 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. An allowance that is not paid or payable to cover specific work related travel is not considered a travel allowance for the purposes of the exception from substantiation. Furthermore, the amount of a bona fide travel allowance must be an amount that could reasonably be expected to cover the relevant travel expenses. This does not require that the amount paid by the employer must equate dollar for dollar to the employees actual expenditure. However there must be relativity between the quantum of the travel allowance and the purpose for which it is said to be paid. (paragraphs 56 - 62 Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses ). In your case, you received a grant. This grant is not paid to cover specific work related travel and is not a bona fide travel allowance for tax purposes. Therefore the exception from substantiation does not apply in your situation. It follows that the reasonable amounts for meal and incidental expenses published by the Commissioner have no application in your circumstances. That is, the amounts in Taxation Determination TD 2012/17 Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2012-13 income year? are not relevant and you cannot use the reasonable allowance amounts as outlined by the Commissioner. To be entitled to claim a deduction for your work related expenses, in addition to including the allowance as assessable income, the expense must be actually incurred and you must have the appropriate written evidence. As outlined in section 900-115 of the ITAA 1997, you need to have written evidence from the supplier. The document must have • the name of the supplier, • the amount of the expense, • the nature of the goods or services and • the date the expense was incurred. Where your original document was not kept, you may ask the relevant hotel or supplier for a copy of your receipt to show your accommodation or meal expenses. However where no written evidence is available, no deduction is allowed.