Private ruling: Work- related expenses
Date of advice: 11 February 2016
Published: March 2016
Ruling period: 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to claim a deduction for the amount incurred on overseas meals and travel regardless of actual expenses incurred? | A1: No

Relevant facts and circumstances: You are employed by Employer X. You undertook a short term assignment in City B from dd/mm/201X until dd/mm/201X. You did not have a spouse or family accompany you to City B. While working in City B you are seconded to working for the host company. Your employer paid for your flights to and from City B. Your employer provided you with a shared two bedroom serviced apartment for the duration of your time in City B. You received an overseas allowance paid by your employer as per the Letter of Assignment of $xx per month. This allowance was paid to cover any increased cost of living in the host country. The allowance appears on your monthly payslips and is include in your gross income amount on your PAYG summary. You were stationed in the one place for the duration of your time in City B. You did not keep a travel diary whilst in City B. You maintained your principle place of residence in City A as well as your registered vehicle, whilst working in City B. You incurred the following expenses whilst in City B: • Meals • Transport to and from work • Dry cleaning and washing • Mobile phone

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 subdivision 900-B

Reasons for decision: Detailed Reasoning - Detailed reasoning: Work-related expenses generally fall for consideration under section 8-1 of Income Tax Assessment Act 1997 (ITAA 1997). Section 8-1 of the 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. Taxation Determination TD 93/174 paragraph 1 states that the mere receipt of an allowance does not entitle an employee to a deduction, whether or not the allowance is received under an industrial award. Under Subdivision 900-B of the ITAA 1997, a deduction is not allowable for a work expense (which includes a meal allowance expense i.e. a loss or outgoing that you incur for food and drink that is covered by a meal allowance) unless the expense qualifies as a deduction under another provision of the income tax legislation and written evidence of the expense has been obtained and retained by the employee taxpayer. Taxation Ruling TR 2004/6 provides the ATO's view when defining a travel allowance. The allowance must meet the following criteria: • Must sleep away from home: the allowance must be paid to cover work-related travel expenses incurred or to be incurred for travel away from the employee's ordinary residence, undertaken in the course of performing duties as an employee (subsection 900-30(3) of the ITAA 1997) • Must cover the cost of accommodation (domestic travel) or food or food and drink or expenses incidental to the travel (paragraph 900-30(3)(b) of the ITAA 1997). • Must be paid as an allowance: an amount for travel expenses that has been folded-in as part of normal salary and wages under a workplace agreement is not considered to be an allowance. In the case that a deduction is allowable, when the allowance has been folded-in as part of the normal salary and wages the exception to substantiation does not apply, written evidence is required. Generally, a travel allowance is paid because the employee is travelling in the course of performing his/her duties. The employee does not change job locations but simply travels in order to carry out the requirements of the job. In your situation, you relocated to City B in order to carry out work for you host employer for six months and once in the host country you did not travel to other destinations as a part of your occupation; this is not travelling in the course of performing your duties for Employer X. The plain wording of the Letter of Assignment illustrates that the overseas allowance you are entitled to for undertaking the short term assignment was paid to cover the increased cost of living in the host country, City B, and not a travel allowance as it was paid regardless if travel was undertaken on those days. In addition the overseas allowance has been folded-in as part of your normal salary and wages and therefore is not considered to be a bona fide travel allowance. As stated above, you are not considered to be travelling for work purposes, thus you did not incur travel allowance expenses because there were no losses or outgoings incurred for 'travel' that was covered by a 'travel allowance'. As such, no deduction for travel expenses is allowable against the overseas allowance. However, if the expense qualifies as a deduction under another provision of the income tax legislation then written evidence of the expense has to been obtained and retained by the employee taxpayer.