Private ruling: Work related expenses - meals and incidentals
Date of advice: 13 January 2021
Published: March 2021
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a deduction for the expenses you incurred for meals and incidentals whilst in Country A? | A1: No.

Relevant facts and circumstances: You have a usual place of residence in Australia where your family resides. You are employed. From XX/XX/20XX to XX/XX/20XX you worked at a range of different sites in City X in Country A. Your work at each site could take from one week to a month or more to complete. You did not travel outside City X for work whilst in Country A. You would return occasionally back to Australia for about a week at a time and did not work during this time. Your employer provided accommodation close to the work sites and you were paid an allowance to cover your meals and incidentals. You received an allowance which was is paid to acknowledge the additional inconveniences associated with working in Country A. Whilst in Country A you incurred expenses for meals and incidentals.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1

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. The receipt of an allowance or the fact that an allowance is not paid does not determine whether an associated expense is deductible. The expenses must meet the criteria for deductibility under section 8-1 of the ITAA 1997. Draft Taxation Ruling TR 2017/D6: Income tax and fringe benefits tax: when are deductions allowed for employees' travel expenses? sets out the general principles for determining whether an employee can deduct travel expenses under section 8-1 of the ITAA 1997. Although TR 2017/D6 is a draft Taxation Ruling, it sets out the current ATO view. Paragraph 54 of TR 2017/D6 provides that there may be some instances where accommodation, meal and incidental expenses may be considered to be incurred in the course of performing an employee's duties but only where: a) the employee's work activities require them to undertake the travel b) the work requires the employee to sleep away from home overnight c) the employee has a permanent home elsewhere, and d) the employee does not incur the expenses in the course of relocating or living away from home. Where accommodation, meal and incidental expenses are incurred by an employee in relocating to a place of work or in living away from home to work, they are preliminary to the work and not deductible. It is important to distinguish between taxpayers who travel in the course of carrying out their employment duties from taxpayers who are living away from home. An example of a taxpayer who travels in the course of performing their work duties is an interstate truck driver who travels away from home overnight. In these types of cases, the accommodation, meal and incidental expenses incurred while the taxpayer is travelling are incidental to the proper carrying out of their employment function and cease to be of a private and domestic nature. For taxpayers who are living away from home, there is a change of job location and a temporary change of residence to a place at or near that location. For example, an employee who is transferred for six months to work in another city and takes up temporary accommodation in that city whilst maintaining their own usual place of residence would be in this category. This would still be the case even if they undertook short trips back to their usual residence. In this type of situation, the accommodation, meal and incidental expenses incurred while the person is living away from their usual home do not cease to be private and domestic in nature. That is, they are considered to retain their character as living expenses rather than becoming work related expenses. In your case, you were working in City X for a period of approximately Z months during the 2019-20 income year. It is considered that during this period your work was located in City X and therefore while in City X for that Z month period, you were living away from home for work rather than travelling on work. Therefore, your meals and incidental expenses retain their character as living expenses and are private and domestic in nature. As such, you cannot claim a deduction for your meals and incidental expenses under section 8-1 of the ITAA 1997.