Private ruling: overseas travel allowance expenses
Published: September 2017
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to a deduction for the cost of food and incidentals incurred up to the reasonable food and incidentals amounts while you were away from home for work purposes? | A1: Yes. | Q2: Are you allowed to claim a deduction for the Commissioner's reasonable travel amount if it is more than your actual meal and incidental expenses? | A2: No

Relevant facts and circumstances: In the 2015/16 income tax year you were an employee. During the period 1 July 2015 to 30 June 2016, you were away from your home for over 200 days when your employer sent you to work overseas. Your employer paid for your accommodation while you were away . Your employer paid you an allowance to cover the cost of food and incidental expenses. The allowance is not included on your payment summary at the end of the financial year. You spent the allowance on food and incidental expenses while you were away from home. You spent at least the reasonable amount specified in Taxation Determination 2015/14 on food and incidental expenses for each day you were away from home. The allowance you are paid is lower than the reasonable allowance amount specified in Taxation Determination 2015/14. You did not keep all receipts for your food and incidental expenses while you were away from home.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Section 900-55 | Income Tax Assessment Act 1997 Section 900-30

Reasons for decision: Summary: You are entitled to claim a deduction up to the Commissioner's reasonable travel amount, without written evidence, where you include the travel allowance as assessable income and you have actually incurred meal and incidental expenses of at least the reasonable amount. | Detailed Reasoning - Exception from substantiation for work related travel expenses - general: 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. A deduction is only allowable if an expense: n is actually incurred, n meets the deductibility tests (that is, the expense is not capital, private or domestic in nature), and n satisfies the substantiation rules. For work related travel expenses, the general substantiation requirement is for taxpayers to keep written evidence of any expense they wish to claim and in some cases a travel diary must also be kept. However, where overseas travel allowance expenses are incurred and meet the deductibility tests, section 900-55 of the ITAA 1997 provides an exception from the general substantiation requirements if the Commissioner considers the total of the amount claimed is reasonable. While you may not have to substantiate the claim you are only allowed to claim the amount of meal and incidental expenses you actually incurred. | Detailed Reasoning - Application of the substantiation exception for reasonable travel allowance expenses: The Australian Tax Office (ATO) view on the application of the substantiation exception for reasonable travel allowance expenses is contained in Taxation Ruling TR 2004/6. TR 2004/6 specifies that for the exception from the normal substantiation provisions to apply to claims for work related travel expenses: n The employee must have been paid a bona fide travel allowance. n The allowance must have been be paid to cover work related travel expenses incurred by the employee for travel away from the employee's ordinary residence that requires an employee to sleep away from home and is undertaken in the course of performing the employee's duties. n The work related travel expenses must be for accommodation, food and drink, or expenses incidental to the travel. n The amount claimed cannot exceed the reasonable amount set by the Commissioner for accommodation, food and drink, or expenses incidental to the travel. | Detailed Reasoning - Bona fide travel allowance: The term 'travel allowance' is defined in subsection 900-30(3) of the ITAA 1997 to be an allowance paid by an employer to cover costs incurred by an employee who is required to travel away from their ordinary residence in the course of their duties and incurs costs for accommodation, food and drink, or expenses incidental to that travel. For overseas travel, whether an amount paid is considered a bona fide amount to cover such expenses depends on the facts of each case, including the arrangements for payment of the amount. TR 2004/6 provides that a bona fide travel allowance is an amount that could reasonably be expected to cover (where applicable) accommodation, or meals or expenses incidental to travel. In your case, you were away from home for work purposes for a period of over 200 days. Your accommodation costs were paid by your employer and you received an allowance from your employer. We consider the allowance you were paid to be a bona fide travel allowance because the allowance was paid to cover your food and incidental expenses while you were away from home for work purposes and could reasonably be expected to cover those costs. However, the travel allowance that you receive from your employer is not included in your payment summary. To be entitled to claim the additional meal and incidental expenses that you incur, this amount must be included in your assessable income. | Detailed Reasoning - Reasonable amounts: For the 2015/16 income year, the reasonable amounts set by the Commissioner for work related domestic travel allowance expenses are published in Taxation Determination TD 2015/14. For overseas travel, TD 2015/14 specifies the reasonable amounts for accommodation, food and drink (breakfast, lunch and dinner) and incidental costs according to the location of the travel and the salary of the employee. | Detailed Reasoning - Conclusion: You can rely on the exception from substantiation to claim deductions up to the reasonable food and drink and incidental amounts specified in TD 2015/14 for the period of time you were working away from home. Therefore, you are entitled to claim a deduction up to the Commissioner's reasonable travel amount, without written evidence, where you include the travel allowance as assessable income and you have actually incurred meal and incidental expenses of at least the reasonable travel amount. However, although the expenses are excluded from the substantiation rules, you may still be asked how you worked out your claim, that is, how you worked out how much you actually expended.