Private ruling: Meal expenses
Date of advice: 6 June 2018
Published: August 2018
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Are you entitled to claim a deduction for meal expenses incurred when travelling overnight on business under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes

Relevant facts and circumstances: You have two roles: ● A professional worker as a salary and wage earner. Income tax is deducted from your fortnightly pay. ● Self-employed service provider (sole contractor) working around the country at various organisations. You invoice the placement agent/ organisations and payments for service have not been subjected to withholding tax. You have a home base with your family. You incur extra expenses every time you travel away for work in your business as a self-employed service provider. You incur additional expenses for meals when you travel to the various locations to work in your business. In 2015, you were granted overseas citizen/family relationship visa by the Australian government. This is a temporary visa allowing you to stay in Australia until 20XX. Since 2017 you have been granted permanent residency in Australia as a skilled migrant and intend to apply for citizenship in 201X once you meet the eligibility (time) criteria. You registered for a Tax File Number in 201X. In 2016 you registered for an ABN which included the main business activity. You also registered for GST in 2016 Your work was on a contract basis through a placement company. You have included GST in your invoices for services since 2016. You are required to lodge business activity statements (BAS).

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 or they are necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. The phrase 'necessarily incurred' does not mean that the expense was unavoidable or logically necessary. The expense must be clearly and appropriately adapted for the ends of the business. Generally, meal expenses are not allowable as a deduction under section 8-1 of the ITAA 1997 on the basis there is not a sufficient connection between the expenditure and the income earning activities of a taxpayer. However, there are exceptions to this rule. The deductibility of expenditure on meals will depend on the essential character of the expenditure on the basis of the facts of each case. Where the relevant expenses are considered to be incurred in carrying on a business, and the business requires overnight travel, the meal expenses are not considered to be private in nature. In your case, the provision of services is your main business activity and how you produce assessable income. It requires you to be away from home in order to generate income in the business. During those times, the expense that you incur for meals is connected to the work in which you are engaged. Therefore, the expenses are considered to be connected to the production of your business income and have the essential character of a business expense. The meal expenses that you incur whilst you are working away from home overnight will be deductible under section 8-1 of the ITAA 1997.