Private ruling: Work related expenses - Expense Allowance
Ruling period: Year ending 30 June 2011 | Year ending 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014
Date scheme commenced: 1 July 2010

Ruling: Question and answer: | Are you entitled to claim a deduction for travel expenses incurred where you are in receipt of an Expense Allowance? | Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 Income Tax Assessment Act 1997 Subdivision 900-B Income Tax Assessment Act 1997 Subdivision 900-E Income Tax Assessment Act 1997 Subdivision 900-F Income Tax Assessment Act 1997 Section 900-30 Income Tax Assessment Act 1997 Section 900-35 Income Tax Assessment Act 1997 Section 900-50 Income Tax Assessment Act 1997 Section 900-95

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 "travel allowance" is defined in subsection 900-30(3) of the ITAA 1997 as 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 who incurs costs for accommodation, food or drink, or expenses that are incidental to the travel. A "travel expense" is defined in section 900-95 of the ITAA 1997 as a loss or outgoing you incur for travel that involves you being away from your ordinary residence for at least one night. The travel may be within or outside Australia and if the expense is incurred in earning your salary or wages, it is dealt with as a work expense. A travel expense might also include costs of accommodation, food and drink, or expenses incidental to work-related travel. The cost of meals is generally a non-deductible private expense and not deductible under the provisions of section 8-1 of the ITAA 1997. When the expense is incurred by an employee required to travel overnight away from their home in the course of their duties, the cost of food and meals may be considered a legitimate work expense. In order to determine whether you are entitled to a travel expense deduction for the cost of your share of the food under section 8-1 of the ITAA 1997, it is necessary for us to consider the application of Taxation Ruling TR 95/13 Income tax: employee police officers - allowance, reimbursements and work-related deductions to your circumstances. Taxation Ruling TR 95/13 contains the ATO view on the assessability of various allowances received by police officers and the deductibility of various work-related expenses that might be claimed by police officers. Paragraph 13 of TR 95/13 contains a list of assessable allowances that may be paid to a police officer and for which deductions may be allowable. The allowances in this list are generally paid to recognise that expenses may be incurred by police officers in the course of their duty. Your Expense Allowance is included in this list. Paragraph 14 of TR 95/13, contains a list of assessable allowances that may be paid to a police officer and for which deductions are not allowed because they are considered allowances that are paid for carrying out work that may be considered unpleasant, special or dangerous, in recognition of holding special skills, for accepting additional responsibility, or to compensate for industry peculiarities. Your Expense Allowance is included in this list. We consider that the Expense Allowance you receive is of a similar type to those allowances listed in paragraph 13 of TR 95/13, rather than those in paragraph 14. We have formed this view because: · Your employer pays you the Expense Allowance to cover the cost of food, drink and expenses you incur in the course of your duties when you are required to be away from home. · You use the allowance to pay for your share of the food which is purchased in bulk. · The Macquarie Dictionary (online edition) defines the word 'victual' as 'food or provisions, usually for human beings', and the word 'victualling' as 'to supply or store with victuals' and 'to eat or feed'. This definition is consistent with the reason the allowance is paid to you under your Award. In your case, we consider the costs you incur for your share of the food purchased while you are away from home overnight to be a travel expense for which you are entitled to a deduction provided you are able to satisfy the substantiation rules. | Detailed Reasoning - Substantiation: The general rule under Subdivision 900-B of the ITAA 1997 is that written evidence is required to substantiate any expenses you wish to claim as a deduction. Broadly speaking, written evidence is a receipt, invoice or similar document that sets out the particulars outlined in Subdivision 900-E of the ITAA 1997. Where the expense relates to domestic travel which involves being away for six or more nights in a row, a travel record must also be kept in accordance with Subdivision 900-F of the ITAA 1997. The Commissioner considers that a travel diary is an appropriate travel record for this purpose. Section 900-35 of the ITAA 1997 contains an exception from the requirements to keep written evidence and travel records for work expenses where the total deduction claimed is $300 or less (although a record must be kept of how the claim was calculated). If the total of deductions claimed is more than $300, all the work expenses must be substantiated, not just the excess over the $300 limit. An employee must include travel expenses (except for certain car, travel allowance and meal allowance expenses) in determining whether or not the amount of a claim for work expenses exceeds the $300 limit and is therefore subject to the general substantiation requirements. However, travel allowance expenses cannot be included in determining whether or not the amount of a claim for work expenses exceeds the $300 limit as they are specifically excluded by subsection 900-35(1) of the ITAA 1997. | Detailed Reasoning - Exception from substantiation: Section 900-50 of the ITAA 1997 contains an exception from the general requirement to keep written evidence of expenses if you receive a travel allowance for domestic travel within Australia to cover accommodation or food and drink and the expenses do not exceed the amounts the Commissioner deems reasonable. Taxation Determination TD 2010/19 Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2010-11 income year? defines the amounts that the Commissioner considers are reasonable for the 2010-11 income year. Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses specifies that for the reasonable allowance exception to apply, the amount paid to an employee must qualify as a travel allowance. TR 2004/6 sets out the conditions that must be met for an allowance to qualify as a travel allowance. To summarise, these conditions include: · the employee must sleep away from home (paragraph 53) · for domestic travel, the amount must be paid to cover the cost of accommodation, food, drink or expenses incidental to the travel (paragraphs 54-55) · the amount paid must be paid to cover specific journeys undertaken for work-related travel (paragraphs 56-58) · the amount must be paid as an allowance (paragraph 59), and · the amount paid must be a bona fide travel allowance, that is, an amount that could reasonably be expected to cover accommodation, meals or expenses incidental to the travel (paragraphs 60-62). The exception from substantiation requirements for reasonable travel allowance expenses does not apply if one or more of these conditions are not met. In relation to whether or not an amount paid to an employee is paid as an allowance, paragraph 59 of TR 2004/6 specifies that: · an amount paid for travel expenses that has been folded-in as part of an employee's normal salary or wages is not considered to be an allowance, and · if an allowance has been folded-in as part of normal salary or wages, the exception from substantiation provisions do not apply and the necessary written evidence must be kept to support any claims for deductible expenses incurred. In your case, your employer pays you an Expense Allowance. The allowance is paid to cover the cost of food, drink and incidentals while you are away from home in the course of your duties. You have advised that the allowance is folded in with normal wages and is not separately disclosed in your annual payment summary. Accordingly, the Expense Allowance you are paid does not qualify as a travel allowance for the purposes of the exception from substantiation for reasonable travel allowance expenses. You will therefore not be entitled to deductions up to the reasonable amounts set by the Commissioner for any expenditure against the allowance. In conclusion, you are entitled to a deduction for the cost of your share of the food in the form of a travel expense. You will need to be able to substantiate any claims made with the necessary written evidence.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | Relevant facts: You are an employee and your position requires you to be away from home. | You are required to pay for food when you are away. | The food is purchased in bulk by someone else and you and the other workers pay for your share of the cost of the food. | You are paid an Expense Allowance to cover the cost of food, drink or incidentals while you are away. | The amount of the allowance will be included in your annual salary on your payment summary, rather than being separately disclosed as an allowance on your payment summary.