Private ruling: Work-related expenses - food and drink
Published: September 2013
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to claim a deduction for expenditure incurred on food and drink? | A1: No

Relevant facts and circumstances: You are employed as a sommelier in a restaurant. Your employment requires you to assist diners in selecting wines and drinks from your employer's extensive wine and beverage list, educate other staff about these wines and beverages, and consult with the head chef about selecting wines which are ideal matches for the meals. Your employer encourages you to research your competitors by wining and dining at their establishments. You do not receive an allowance from your employer to cover the purchase of the wines and meals.

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. A number of significant court decisions have determined that, for an expense to satisfy the tests in section 8-1 of the ITAA 1997: (a) 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; Hayley v FC of T (1958) 100 CLR 478; [1958] ALR 225; 11 ATD 404); (b) 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; 8 ATD 431); (c) 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 ( FC of T v Cooper (1991) 29 FCR 177; 91 ATC 4396; (1991) 21 ATR 1616 (Cooper's case). Generally speaking, food and drink consumed by an employee is considered to be a private expense and is therefore not deductible. The Full Federal Court considered the treatment of food costs in Cooper's case . In that case, a professional footballer had been instructed to consume large quantities of food during the off-season to ensure his weight was maintained. By majority, the Full Federal Court found that the cost of additional food to add to the weight of the taxpayer was not allowable. Hill J (FCR at 199-200; ATC at 4414; ATR at 1636) said: 'The income-producing activities to be considered in the present case are training for and playing football. It is for these activities that a professional footballer is paid. The income-producing activities do not include the taking of food, albeit that unless food is eaten, the player would be unable to play. Expenditure on food, even as here "additional food" does not form part of expenditure related to the income-producing activities of playing football or training.' Essentially the reasoning in Cooper's case was that the connection (nexus) between the expenditure and the earning of assessable income was insufficient for the deduction to be allowable under section 8-1. Additionally the expenditure was of a private nature and therefore specifically excluded from being deductible under section 8-1. In your case, you are employed as a sommelier. Your employment includes such duties as assisting guests with their wine and beverage choices, educating other staff and consulting with the chef about matching food and beverages. It is not a duty of your employment to dine in restaurants, as it would be for a food critic, and it is not a prerequisite of earning your income that you incur such expenses. As such, there is insufficient evidence to show that your income is affected by the wine and food expenditure. The expenditure is merely encouraged, not required by, or supported by your employer, as no reimbursement or allowance is provided by your employer. Although the knowledge gained from wining and dining at your employer's competitors would possibly assist you to carry out your duties more efficiently, the expense is not necessarily incurred in order to earn that income. We consider the connection is too general or tenuous to allow a deduction for any portion of the cost. Accordingly, you are not entitled to a deduction under section 8-1 of the ITAA 1997 for the cost of wine and restaurant meals.