Private ruling: Travel expenses
Date of advice: 30 June 2017
Published: November 2017
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to a deduction for meal expenses up to the Commissioner's reasonable allowance amounts, without substantiation, when you undertake work related travel? | A1: No.

Relevant facts and circumstances: You are an employee who is required to travel for work related purposes. You are employed on a full time basis. Your employment is based on you fulfilling a quota and there is no written contractual document applying to you, and no recorded formal details of engagement. You have your itinerary approved before you travel, and your meal allowance is paid directly into your bank account. If your expenses exceed a certain amount you need receipts, individual payments do not exceed this amount. An approved travel form is used to process your payment once your travel is completed. The process is automated. You submit an estimate of travel and accommodation in advance for approval before you travel. Following the work related travel, you provide a report to your employer, and payment is made directly to your credit card. If you do not submit your report within two weeks of the travel, it is possible that payment will not be made. This payment to you is not taxable. It does not appear on your payment summary as a taxable amount, and is not declared as income in your tax return.

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 900-50 | 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 deduction is only allowable if an expense: n is actually incurred, n meets the deductibility tests, and n 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. An exception to this is where you are undertaking work-related travel and are required to stay away overnight. In your case you are away from home overnight for work. 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 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. As outlined in Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses, the exception from substantiation for travel allowance expenses provided by section 900-50 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 meal expenses applies in your circumstances, we need to consider whether your payment 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 92/15 Income tax and fringe benefits tax: the difference between an allowance and a reimbursement states that a payment is an allowance when a person is paid a definite predetermined amount to cover an estimated expense. It is paid regardless of whether the recipient incurs the expected expense. The recipient has the discretion whether or not to expend the allowance. A payment is a reimbursement when the recipient is compensated exactly (meaning precisely, as opposed to approximately), whether wholly or partly, for an expense already incurred although not necessarily disbursed. In general, the provider considers the expense to be its own and the recipient incurs the expenditure on behalf of the provider. As a result, a requirement that the recipients vouch or substantiate expenses lends weight to a presumption that a payment is a reimbursement rather than an allowance. You submit an estimate of travel and accommodation in advance for approval before you travel. Following the work related travel, you provide a report to your employer, and payment is made directly to your credit card. In your case if you don’t submit your report within two weeks of the travel, it is possible that payment will not be made. This payment to you is not taxable. It does not appear on your payment summary as a taxable amount, and is not declared as income in your tax return. Your payment is not regarded as a bona fide travel allowance. You were paid a non-taxable amount when you were away from home overnight for work. Non-taxable amounts are not assessable income and as such no deduction is allowed in relation to the associated expenses. In your case, the non-taxable payment is not considered to be a bona fide travel allowance for tax purposes. Therefore your allowance does fall within the definition of a travel allowance under subsection 900-30(3) of the ITAA 1997. As your allowance is not a travel allowance, you are not entitled to rely on the exception from the substantiation provisions under section 900-50 of the ITAA 1997 in regard to your meal expenses. It follows that the reasonable amounts outlined in Taxation Determination TD 2014/19 and TD 2015/14 have no application in your circumstances.