Private ruling: Substantiation of work-related travel expenses
Published: February 2012
Ruling period: Year ending 30 June 2011 | Year ending 30 June 2012
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you required to retain written evidence of work-related travel expenses if you have received a bona fide travel allowance, and your claim is below the Commissioner's reasonable allowance amounts? | A1: No

Relevant facts and circumstances: You are an employee. You regularly travel overseas in the course of your duties. You have received a bona fide travel allowance for meals and incidental expenses from your employer but it is not shown separately on your payment summary. You obtain a breakdown of all allowances paid from your employer at the end of the financial year. The travel allowances relate to work travel less than 6 days. You wish to claim a deduction for travel allowance expenses you incur up to the reasonable allowance amounts as determined by the Commissioner.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Section 900-50 | Income Tax Assessment Act 1997 Section 900-65 | Income Tax Assessment Act 1997 Section 900-115 | Income Tax Assessment Act 1997 Section 900-150

Reasons for decision: Summary: If a bona fide travel allowance is received, and the claim does not exceed the Commissioner's reasonable amount, written evidence does not need to be retained | Detailed Reasoning - Detailed reasoning: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for a loss and outgoing to the extent that it is incurred in gaining or producing assessable income. However, a loss or outgoing is not deductible if it is of a capital, private or domestic nature, or it is incurred in gaining or producing exempt income. The cost of meals is normally considered to be a private expense and is not an allowable deduction under section 8-1 of the ITAA 1997. However, where you are required to sleep away from home in the performance of your duties, expenditure on food and drink is considered to have been necessarily incurred in the performance of your duties and a deduction is allowable. In addition to the above, most work related travel expenses must also satisfy the substantiation requirements of Division 900 of the ITAA 1997. However, section 900-50 of the ITAA 1997 provides an exception to this substantiation requirement where a travel allowance is received for domestic travel expenses. If a travel allowance is received and the amount of the claim for expenses is no more than the reasonable amount, as determined by the Commissioner, substantiation is not required. Section 900-65 of the ITAA 1997 further states that members of international flight crews who receive a bona fide travel allowance are not required to retain substantiation provided that the travel is predominantly outside Australia, and the claim for expenses does not exceed the Commissioner's reasonable amount. The Commissioner's view on how the exception from substantiation rule for travel expenses should be applied is set out in Taxation Ruling TR 2004/6. In order to claim an exception from substantiation, any allowance received must actually be paid as an allowance. TR 2004/6 states that in order for a travel allowance to be considered a bona fide travel allowance, the allowance must be paid to cover specific journeys: 56. The travel allowance must be paid for specific journeys undertaken or to be undertaken for work-related travel. A travel allowance that is not paid to cover relevant expenses for specific journeys undertaken or to be undertaken for work-related travel, is not a travel allowance for the purposes of the exception from substantiation. 57. Examples of expenses relating to allowances that would not qualify for the exception from substantiation because they are not travel allowances paid to cover deductible expenses for specific journeys are: · where a fixed annual travel allowance amount of, say, $2,000 a year is paid, regardless of how often or even whether travel is actually undertaken; or · where a travel allowance is paid at a certain rate per hour for hours worked, even if deductible work-related travel is not undertaken. Where travel expenses are claimed, and a bona fide travel allowance has been paid to a taxpayer, the expenses do not need to be substantiated by written evidence provided the expense claimed is less than the annual Commissioner's reasonable amount. However if you travel away from your ordinary place of residence for more than 6 nights in a row, you must also keep a travel diary. The travel diary must be kept for both domestic and international travel. Section 900-150 of the ITAA 1997 states that a travel diary must contain the following information: o The nature of the activity o The day and approximate time it began o How long it lasted; and o Where you engaged in it.

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