Private ruling: Meals and incidentals
Published: July 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Can you claim a deduction for the amount for meals and incidentals you incurred without substantiation if you declare the bona fide allowance you received as assessable income? | A1: Yes.


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

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 the course of gaining or producing assessable income, but are not allowable to the extent that they are of a capital, private or domestic nature. Meal expenses are normally private or domestic in character. However, where a taxpayer is away from home overnight in connection with an income producing activity, meal expenses are deductible. The expenditure is not considered private because its occasion is the taxpayer's travel away from home on income producing activities. As a general rule, written evidence is required to substantiate any expense you wish to claim as a deduction. Section 900-50 of the ITAA 1997 provides that the substantiation requirement to obtain written evidence does not apply to claims by employee taxpayers for expenses covered by a bona fide travel allowance if the amount of the claim for expenses incurred does not exceed the amount the Commissioner considers reasonable (Taxation Determination TD 2012/17 Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2012-13 income year? ). The allowance must be paid to cover work-related travel expenses 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) and which involves sleep away from home . The work-related travel expenses must be for accommodation, or food or drink, or expenses incidental to the travel. TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses states at paragraph 12 that all allowances must be shown as assessable income in the employee's tax return. However where: • the allowance received is a bona fide travel allowance • the allowance received does not exceed the reasonable amount; and • the allowance has been fully expended on deductible expenses, the allowance received is not required to be shown as assessable income in the employee's tax return. Where the allowance is not required to be shown as assessable income in an employee's tax return, and is not shown, a deduction for the expense cannot be claimed in the tax return. However, if you do declare the allowance as assessable income, you may be entitled to claim a deduction. In your case, you have received an allowance for meals and incidentals. You have spent more than the allowance per day but less than the reasonable allowance amounts set out in TD 2012/17. The allowance is considered to be a bona fide allowance. As you were in receipt of a bona fide allowance and the amounts you incurred were less than the reasonable amounts you are entitled to a deduction for the outgoings you actually incurred. Therefore, if you declare the allowance as assessable income, you can claim the amount you actually incurred without substantiation. It should be noted that where you rely on the exception from substantiation you may still be required to show the basis for determining the amount of your claim, that the expense was actually incurred and that it was for work related purposes. What counts as evidence for a claim subject to the substantiation exception will vary according to individual circumstances and the nature of the expenses.

You were required to travel overseas for work purposes. | Your employer provided accommodation for you. | Your employer also provided you with a credit card with credit for an allowance amount for each night you are away. | You incurred expenses in excess of the allowance amounts but less than the reasonable allowance amounts. | You did not retain substantiation for your expenses.