Private ruling: Meal and incidental expenses
Published: February 2013
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to use the reasonable allowance amounts to claim meals and incidentals expenses? | A1: No. | Q2: Are you entitled to a deduction for meal and incidental expenses? | A2: No.


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, or a provision of the ITAA 1997 prevents it. 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, · 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. 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. However, no deduction is allowable if a taxpayer is merely incurring accommodation and/or meal expenses close to their usual work location. In your case you did not receive an overtime meal allowance. Therefore we need to consider whether you were undertaking work related travel. The expenses must meet the criteria for deductibility under section 8-1 of the ITAA 1997 before a deduction is allowable. 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 on travel, accommodation or meals is incurred in the course of gaining or producing assessable income (Case V111 88 ATC 712). Where a taxpayer is away for an extended period of time, the associated costs including accommodation and meals remain private in nature and are not deductible under section 8-1 of the ITAA 1997. Even though the expenditure had a causal connection with the earning of income, the expenditure is inherently of a private or domestic nature and therefore no deduction is allowable. Taxation Ruling IT 2566 states that an employee who is travelling to commence employment duties at a new work location is not travelling on duty. The employment duties do not commence until the employee reports to work at the new location. This is so whether the transfer is voluntary or at the employer's request. When relocating to a new work site, a taxpayer is not travelling on their work, but is travelling to their work. Therefore any associated, travel, accommodation or meal expenses incurred is not regarded as deductible work related expenses. In Federal Commissioner of Taxation v. Toms 20 ATR 466; 89 ATC 4373, 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 the above case relates more to accommodation expenses, the principles are relevant to your circumstances. Where a person moves to a new place for work, the new place is regarded as their normal place of work. The associated accommodation and meal expenses incurred are not related to the actual performance of their duties. They are more a convenience and a prerequisite to the earning of assessable income and are not expenses incurred in the course of gaining or producing that income. Furthermore, the essential character of the expense is of a private or domestic nature. Accordingly, no deduction is allowed for the accommodation or meal expenses. It is considered that city A was your normal place of work for the relevant period. While it is acknowledged that your main residence was in city B, it is not considered that your travel between city B and A was work related travel. Rather it was private travel carried out to enable you to commence your employment duties. The distance of the travel does not alter the private nature of the travel. That is, you were not away from home overnight for work purposes, as city A was your new work base for the period of the contract. As city A was your normal place of work, your meal expenses were not associated with any work related travel. Similarly, any incidental expenses incurred in relation to your travel to and from city A and/or living in city A, are not incurred during the actual performance of your work, that is, during the production of assessable income. The meals and incidental expenses incurred while living and working in city A are not incurred in gaining or producing your assessable income. Rather they are a private expense and no deduction is allowable under section 8-1 of the ITAA 1997. As your meal and incidental expenses in city A are considered to be private in nature, it follows that the reasonable rates published by the Commissioner have no application in your situation. Please note, the reasonable travel amounts are only relevant where an employee receives a bona fide travel allowance from their employer and have incurred deductible work related travel expenses. As you did not receive a travel allowance from your employer and your expenses are not allowable, the rates are not relevant in your circumstances.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You worked in city A for a few months. | During this period you returned to city B, three times. | You were able to go home for the weekends. The employer paid for one trip per month. | Your employer paid for your accommodation whilst working in city A. You paid for your food and incidentals. | You were to be reimbursed by your employer for your food and incidental expenses, however, the reimbursement did not eventuate.