Private ruling: Meal expenses
Published: June 2013
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you entitled to a deduction for meal expenses up to the Commissioner's reasonable allowance amounts, without substantiation? | A1: No. | Q2: Are you entitled to a deduction for meal expenses incurred and substantiated for the periods you are away overnight for work? | A2: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5. | Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Section 900-10 | Income Tax Assessment Act 1997 Section 900-30 | 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 number of significant court decisions have determined that for an expense to be an allowable deduction: § it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense ( Lunney v. FC of T ; (1958) 100 CLR 478 ( Lunneys case )), § there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income ( Ronpibon Tin NL v. FC of T , (1949) 78 CLR 47), and § it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income ( Charles Moore Co (WA) Pty Ltd v. FC of T , (1956) 95 CLR 344; FC of T v. Hatchett , 71 ATC 4184). 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 received an allowance on such occasions for the 20XX income year. Where an assessable allowance is received, an employee is not automatically entitled to a deduction for expenses incurred in relation to an allowance. The expenses must meet the criteria for deductibility under section 8-1 of the ITAA 1997 as well as meet the substantiation requirements. The cost of meals incurred in the course of work-related travel away from home is generally deductible. However, section 900-10 of the ITAA 1997 requires you to substantiate the expenses. 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, § 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, we need to consider whether your allowance is regarded as a bona fide travel allowance. Subsection 900-30(2) of the ITAA 1997 states that a travel allowance expense is a loss or outgoing you incur for travel that is covered by a travel allowance. 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. Taxation Ruling TR 2004/6 discusses the conditions when the substantiation exception for travel allowance expenses applies. For travel allowance expenses to be considered for the exception from substantiation, the employee must be paid a bona fide travel allowance. A travel 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. What is considered to be a bona fide travel allowance depends on the facts of each case. 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 purpose of the exception from substantiation. Paragraph 59 of TR 2004/6 states that a fixed annual entitlement for travel expenses that has been folded in as part of normal salary under a workplace agreement is not considered to be an allowance. Where an allowance has been folded in as part of a person's normal salary, the exception from substantiation does not apply. Therefore, for the 20YY income year where your travel expenses were part of your total salary package and no separate allowance was paid, you must substantiate any allowable deductions. The Commissioner publishes reasonable amounts for accommodation, meals and deductible expenses incidental to travel. Taxation Determination TD 2010/19 set out the relevant amounts that the Commissioner considers reasonable for the 2010-11 income year. The amounts set for meal expenses represent amounts that could reasonable be expected to be incurred for such expenses. In your case, you were paid an allowance when you were away from home overnight for work for the 20XX income year. The amount received is considerably less than the Commissioner's reasonable amounts. The amount you received is less than half of the Commissioner's reasonable amounts and in fact for your overseas stay, the allowance is less than a third of the Commissioner's reasonable amounts. It is considered that the amounts you received are not a genuine travel allowance and could not reasonably be expected to cover your expenses while away from home. That is, the allowance you received from your employer does not fall within the definition of a travel allowance under subsection 900-30(3) of the ITAA 1997. 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 travel expenses. To be entitled to claim a deduction for your work related meal expenses, the expense must be actually incurred and you must have the appropriate written evidence and the necessary travel records. Please note, where you are away from home for six or more nights in a row, you need to keep travel records. A travel record is to show which of your activities were undertaken in the course of producing your assessable income.

Relevant facts: You are employed and work in various locations in Australia and overseas. | Accommodation is paid for by your employer however you pay for your meals. | For the 20XX income year, an allowance was received for the days you were away from home overnight for work purposes. You receive an allowance of $X per day on such occasions. This allowance is declared as assessable income. | For the 20YY income year your employment agreement changed and your meal allowance was included in your salary package. | You keep a work diary to record your work activity. | You do not have all receipts for meals as they are not always available due to the location of many of the work sites. | You are away from home for about five weeks for some projects. Other times you are away from two weeks to three months for work. | The Commissioner's reasonable amount for meals in a relevant overseas country is $Y for the 20XX income year. | You stay in motels in the larger places, however when in the smaller country areas, you often stay in cabins. | When in the country areas you often buy your food at the supermarket.