Private ruling: Work related travel expenses - reasonable allowances
Date of advice: 9 September 2016
Published: October 2016
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to calculate a deduction for work-related meal and incidental expenses using the Commissioner's reasonable allowance amount, where you have received a travel allowance? | A1: No

Relevant facts and circumstances: You are required to travel in the course of your employment. Your employer pays for your accommodation when you are travelling for work, but pays you a daily travel allowance for meals and incidentals. The allowance is shown separately on your payment summary.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Subdivision 900-B

Reasons for decision: Summary: Section 8-1 ITAA 1997 allows a deduction for work related travel expenses including the actual cost of meals and accommodation away from home where a taxpayer includes an allowance paid by the employer for such outgoings in earning assessable income. The receipt of a travel allowance does not automatically entitle a taxpayer to a deduction for travel expenses. Nor can a claim be automatically made up to the amount of the travel allowance received unless travel expenses of at least that amount have been incurred. Where a taxpayer is paid a travel allowance to cover the cost of meals, accommodation and incidentals while away from home, a deduction for expenses relating to these outgoings may be allowable without the need to comply with the substantiation requirements if the expenditure claimed is reasonable. Subsection 900-50(2) of the ITAA 1997 requires that in determining what is reasonable, the Commissioner must take into account the total losses or outgoings it would be reasonable to incur for accommodation, food or drink, or expenses incidental to the travel. Generally, the Commissioner releases a Taxation Determination setting out the amounts the Commissioner considers reasonable in respect of claims made for work related travel expenses for a particular income year. Taxation ruling TR 2004/6 addresses the substantiation exception for reasonable travel and overtime meal allowance expenses. Paragraphs 8 and 9 of TR 2004/6 state the following: 8. Under Subdivision 900-B of the ITAA 1997, a deduction is not allowable for a work expense, including a meal allowance expense or travel allowance 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. 9. Subdivision 900-B also provides that the substantiation requirement to obtain written evidence does not apply to claims by employee taxpayers for expenses covered by: • an overtime meal allowance paid under an industrial instrument; or • a domestic travel allowance or overseas travel allowance, whether or not the allowance is paid under an industrial instrument, if the amount of the claim for losses or outgoings incurred does not exceed the reasonable amounts. Paragraph 15 of TR 2004/6 further states that if a taxpayer relies on the exception from substantiation, they may still be required to show the basis for determining the amount of their claim, that the expense was actually incurred, and that it was for work-related purposes. You cannot calculate your claim simply by multiplying the Commissioner's reasonable amount by the amount of nights you travelled for work. The Commissioner's reasonable amount is merely an arbitrary figure at which the requirement to keep documentary evidence applies, it is not designed to be the basis for the calculation of work-related travel expense claims. If your actual expenses exceed the reasonable allowance amount, you may choose to limit your claim to the reasonable amount and take advantage of the substantiation exception. You may still be required to prove however the basis for determining the amount of the claim, that the expenses were actually incurred, and that, they were incurred for a work-related purpose.