Private ruling: Travel and meal expenses
Published: March 2013
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you entitled to a deduction for car expenses in travelling to and from your place of work? | A1: No. | Q2: Are you entitled to a deduction for meal and incidental travel expenses? | A2: No. This ruling applies for the following periods Year ended 30 June 2011 Year ended 30 June 2012 The scheme commenced on 1 July 2010



Reasons for decision: Summary: Allowable deductions 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 ( Lunney's 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. Although your travel allowance is assessable income, you are 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. 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 did not receive an overtime meal allowance. Therefore we need to consider whether you were undertaking work related travel. Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example unless a person arrives at work it is not possible to derive income. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income. Rather, the expenses are incurred to enable the taxpayer to commence income earning activities ( Lunney's case ). A deduction is generally not allowable for the cost of travel between home and work because the expenses are not considered to be incurred in producing assessable income. These expenses are incurred as a consequence of living in one place and working in another and any expenses incurred to enable a taxpayer to commence their income earning activities are therefore considered private in nature. The mode of transport, lack of suitable public transport, time of travel, distance of travel are all factors which do not alter the essential character of travel between home and work as private in nature. The cost of travel between home and work is generally incurred to put a person in a position to perform duties, rather than in the performance of those duties ( Case V111 88 ATC 712, Taxation Rulings IT 2543 and IT 112). This is supported by the decision in Federal Commissioner of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466, ( Toms case ) where the Federal Court held that expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location were not an allowable deduction as they were considered to be private expenses. The Federal Court disallowed the forest workers deduction for the cost of maintaining a caravan and other living expenses. The taxpayer's family home in Grafton was some 108 kilometres from the base camp so he lived in the caravan during the week and returned to the family home on weekends. The caravan was rendered necessary as much by the taxpayer's choice of the place of his residence in Grafton as by his employment in the State forest, and its purpose was to enable him to retain his residence in Grafton although he was employed in the State forest. Had he lived at a town closer to the forest, there is no question the caravan would have been unnecessary. Although your circumstances are different to the above case, the principles remain relevant. You receive an allowance for travel expenses. It is considered that the work place is your normal place of work. While it is acknowledged that your usual home is in city A, it is not considered that your travel between city A and your work is work related travel. Rather it is private travel carried out to enable you to be closer to your work and commence your employment duties. The distance of the travel does not alter the private nature of the travel. Your situation is similar to Toms case and your travel to and from city A is not incurred in earning your assessable income. As the work place is your normal place of work, your meal expenses were not associated with any work related travel. You incurred expenses for meals while living and working at the work site. These expenses are not incurred in gaining or producing your assessable income. Rather they are a private expense and no deduction is allowable. Similarly, any incidental travel expenses incurred are not incurred during the actual performance of your work, that is, during the production of assessable income and are therefore not deductible under section 8-1 of the ITAA 1997. Please note, that Taxation Ruling TR 2004/6 discusses the conditions when the substantiation exception for travel allowance expenses applies. The Commissioner also publishes reasonable amounts for accommodation, meals and deductible expenses incidental to travel. Taxation Determination TD 2010/11 and TD 2011/17 sets out the relevant amounts that the Commissioner considers reasonable for the 2010-11 and 2011-12 income years respectively. However, in your case, as you have not incurred expenses that are deductible, the substantiation provisions do not apply. It follows that the reasonable amounts and the principles in TR 2004/6 and TD 2010/11 and TD 2011/17 have no application in your case.

Relevant facts: You are a full-time employee with the one employer. | You work several kilometres from your residential address. You have the one work place. | You are currently renting accommodation away from your residential address. | The accommodation is in a country area, close to your work. | You stay in this rented accommodation for the duration of your work shift. | You drive back to city A at the end of each shift period. | Your family does not stay with you in the rented accommodation. | You receive a living away from home allowance. You have completed a living away from home declaration form for your employer. | You regularly work overtime. You do not receive an overtime meal allowance. | You also receive a travel allowance. | Your travel claimed includes travel to and from your residential address to the rented accommodation close to your work. | You do not carry tools for work each day, however you take tools back home at the end of each shift. Tools are left at work while you are living at the rented accommodation. | You have kept a log book and record of your travel. | You incurred costs for your meals and incidental expenses. | Incidental costs include hair cuts, shaves, toothpaste, tooth brushes, shoes and clothing. | You do not have receipts for your meal or incidental costs. | Relevant legislative provisions | Income Tax Assessment Act 1997 Section 8-1.