Private ruling: Overtime meal expenses deduction
Published: August 2014
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for overtime meal expenses up to the reasonable amounts as determined by the Commissioner, when you include the overtime meal allowances in your income tax return for the relevant financial years? | A1: Yes.

Relevant facts and circumstances: You are employed full-time and have specialist skills and qualifications and as such you do a large amount of overtime. For every occasion you work overtime you are paid an overtime meal allowance by your employer, under an industrial award. The amount of the overtime meal allowance you are paid depends on the time of day/night that you work overtime, but it is less than the reasonable limits for the allowance for meals as determined by the Commissioner. The overtime meal allowances you are paid are not rolled into your annual salary, and you have not paid tax on these amounts. The overtime meal allowances are shown on your payslips but are not included on your PAYG payment summaries. You spend more on overtime meals than the allowance you receive and more than the reasonable amount for overtime meal allowance as determined by the Commissioner. You are able to substantiate all overtime meal expenses you have incurred. You wish to claim a deduction for up to the reasonable amount for overtime meal allowance as determined by the Commissioner. The reasonable amounts for overtime meal allowance as determined by the Commissioner are as follows: • 2012-13 financial year: $27.10 (Taxation Determination TD 2012/17) • 2013-14 financial year: $27.70 (Taxation Determination TD 2013/16)

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) generally allows a deduction for any loss or outgoing to the extent that it is incurred in gaining or producing assessable income. However, you cannot claim a deduction for a loss or outgoing to the extent that it is of a capital, private or domestic nature. The types of expenses that are deductible for police officers are considered in Taxation Ruling TR 95/13. Whilst you are not employed in this occupation, the principles outlined in the ruling can be applied to your situation. Generally expenditure on meals consumed by employees throughout the course of a working day is considered to be private in nature. However paragraph 144 and 145 of TR 95/13 states: 144. A deduction is allowable for the cost of meals bought while working overtime if an award overtime meal allowance is received. An overtime meal allowance is paid under a law or industrial award for the purpose of enabling an employee to buy food and drink at meal or rest breaks while working overtime. 145. The general rule is that no deduction is allowed for work-related expenses unless written evidence, such as a receipt, is obtained. However, special substantiation rules apply to overtime meal expenses if a police officer receives an overtime meal allowance paid under an industrial award. A deduction is allowable without substantiation for expenses incurred, provided the claim does not exceed the amount considered reasonable by the Commissioner of Taxation. Reasonable amounts are published annually by the Commissioner in a Taxation Ruling. The Commissioner publishes the amount considered to be reasonable each year. For the 2012-13 and 2013-14 financial years the reasonable amount for overtime meal allowance expenses were $27.10 and $27.70 (TD 2012/17 and TD 2013/16) respectively. Where a taxpayer receives an overtime meal allowance and the expenses claimed by the taxpayer are no more than the reasonable amount for a particular year as set out in the relevant ruling, the cost of the meals may be deductible without the need for written evidence under section 900-60 of the ITAA 1997. While substantiation is not required, a taxpayer will still need to show how they calculated the expense. TR 2004/9 states where the following conditions are met, the allowance is not required to be included in the taxpayer's assessable income: • the allowance is not shown on the taxpayer's payment summary • the allowance received is a bona fide overtime meal allowance • the allowance received does not exceed the reasonable amount, and • the allowance has been fully expended on deductible expenses. In accordance with PAYG Bulletin No. 1, an employer is not required to show overtime meal allowance amounts on the employee's payment summary if the amount paid is less than a reasonable allowance. Where the allowance is not required to be shown as assessable income in the employee's tax return, and is not shown, a deduction for the expense cannot be claimed in the tax return (paragraph 12 of Taxation Ruling TR 2004/6). In your case, your allowances have not been shown on your payment summaries and you are seeking to claim a deduction for the expenditure incurred on overtime meal expenses. Where you include your overtime meal allowances in you assessable income for the relevant financial years, you will be entitled to a deduction for the costs incurred in purchasing overtime meals up to the reasonable amount for meal expenses actually incurred. While you are not required to provide substantiation in those instances, you still need to show how you calculated the amounts. If the expenses incurred on overtime meals exceed the reasonable amount and you sought to claim the full amount, the whole claim would be required to be substantiated with written evidence.