McINTOSH v FC of T

Members:
DW Muller SM

Tribunal:
Administrative Appeals Tribunal (sitting as the Small Taxation Claims Tribunal)

MEDIA NEUTRAL CITATION: [2001] AATA 702

Decision date: 7 August 2001

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DW Muller (Senior Member)

This is an application to review an objection decision which disallowed a claim for expenditure on meals and accommodation whilst the applicant was working away from his home, during the tax year ending on 30 June 1998.

2. The applicant lives in Brisbane. During the tax year in question, the applicant worked from time to time on a construction site in Mackay.

3. The applicant originally claimed for meals and accommodation for 125 days at the rate of $127.65 per day. That is, he claimed expenses of $15,956. By letter dated 25 August 2000, the applicant altered his claim to cover 59 days at $108.45 per day. That is, he reduced his claim from $15,956 to $6,398.

4. The evidence of the applicant and other material placed before the Tribunal was not controversial and the Tribunal finds as follows:

• (a) During the tax year ending 30 June 1998, the applicant worked in Mackay for a total of 59 days.
• (b) During his periods of employment in Mackay the applicant stayed at motels. He incurred accommodation and meal expenses of the order of $60 per day.
• (c) The applicant kept some of his receipts and gave them to his tax agent, but they have been lost. He has no other method of substantiating his expenditure.
• (d) During the tax year in question the applicant was paid a salary of $51,594. He was also paid allowances for using his own vehicle, a site allowance, a height above the ground allowance and a ``live away allowance'' of $2,265.10.
• (e) The live away allowance was paid to the applicant pursuant to the provisions of Clause 6.5 of the ``Building Construction Industry Award - State''. The rates at the time were $38.10 per day or $226.50 per week from 23 September 1996 to 31 August 1997 and $39.10 per day or $273.20 per week from 1 September 1997 to 31 August 1999.
• (f) The said Award also contained a provision which allowed for employees to claim an increase in the allowance if they could satisfy the employer that they had reasonably incurred a greater outlay than that prescribed.
• (g) The applicant did not make a claim for an increased allowance. He could have taken lower quality accommodation than he did, and survived on the allowance provided for in the Award, but he preferred to pay a little extra for better accommodation.

5. In making his claim for expenses associated with meals and accommodation, the applicant relied upon a combination of the following sections from the Income Tax

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ATC 2274

Assessment Act 1997, plus the paragraphs listed below from Taxation Ruling TR 97/14.

Division 8

``8-1 General deductions

(1) You can deduct from your assessable income any loss or outgoing to the extent that:

• (a) it is incurred in gaining or producing your assessable income; or
• (b) it is necessarily incurred in carrying on a *business for the purpose of gaining or producing your assessable income.''

Division 900

Sub-Division 900-A

``900-10 Substantiation Requirement

To deduct certain types of losses or outgoings, you need to substantiate them under this Division.''

Sub-Division 900-B

``900-15 Getting written evidence

(1) To deduct a *work expense:

• (a) it must qualify as a deduction under some provision of this Act outside this Division; and
• (b) you need to substantiate it by getting written evidence.

Subdivision 900-E tells you about the evidence you need.

...

900-30 Meaning of work expense

General

(1) A work expense is a loss or outgoing you incur in producing your salary or wages.

Travel allowance expenses included

(2) Travel allowance expenses count as *work expenses. A travel allowance expense is a loss or outgoing you incur for travel that is covered by a *travel allowance. The loss or outgoing must:

• (a) be for accommodation or for food or drink; or
• (b) be incidental to the travel.

(3) A travel allowance is an allowance your employer pays or is to pay to you to cover losses or outgoings:

• (a) that you incur for travel away from your ordinary residence that you undertake in the course of your duties as an employee; and
• (b) that are losses or outgoings for accommodation or for food or drink, or are incidental to the travel.

The travel may be within or outside Australia.

...

900-50 Exception for domestic travel allowance expenses

(1) You can deduct a *travel allowance expense for travel within Australia without getting written evidence or keeping travel records if the Commissioner considers reasonable the total of the losses or outgoings you claim for travel covered by the allowance.

(2) In deciding whether the total of the losses or outgoings you claim is reasonable, the Commissioner must take into account the total of the losses or outgoings of the following kinds that it would be reasonable for you to incur for the travel:

• (a) accommodation;
• (b) food or drink;
• (c) losses or outgoings incidental to the travel.''

TR 97/14

``Class of person/arrangement

3. This Ruling sets out the amounts which the Commissioner of Taxation considers are reasonable for the 1997-98 year of income in relation to claims made for:

• ...
• (b) domestic travel allowance expenses ;
• ...

which are work-related losses or outgoings incurred and are covered by award overtime meal allowances, domestic travel allowances and overseas travel allowances.

4. Subdivision 900-B of the Income Tax Assessment Act 1997 (`ITAA 1997') provides that the substantiation requirement to obtain written evidence does not apply to claims by employee taxpayers for expenses covered by:

• (a) an overtime meal allowance paid under an industrial instrument; or

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  ATC 2275

• (b) a domestic travel allowance or overseas travel allowance, whether or not the allowance is paid under an industrial instrument;

if the amount of the claim for losses or outgoings incurred does not exceed the amount that the Commissioner considers reasonable (see paragraphs 21 to 36 below). This Ruling discusses the exceptions from substantiation which are available for travel allowance and award overtime meal allowance expenses .

...

Substantiation exception

14. The objective of the substantiation exception provisions contained in subdivision 900-B of the ITAA 1997 is to relieve taxpayers covered by the exception from substantiation of the requirement to determine claims from detailed calculations based on records or receipts. If a claim covered by a travel allowance or award overtime meal allowance qualifies for exception from substantiation, it is not necessary to keep written evidence as required under subdivision 900-E of the ITAA 1997.

15. A taxpayer can choose not to use the exception from substantiation. Each taxpayer can decide between maintaining fewer records and possibly claiming a lower deduction or keeping written evidence and claiming a higher deduction for deductible expenses incurred.

16. If a taxpayer relies on the exception from substantiation they may still be required to show the basis for determining the amount of their claim and that the expense was actually incurred for work- related purposes. What is a reasonable basis for determining the amount of a claim which is subject to an exception from substantiation will vary according to individual circumstances and the nature of the expense .

17. If necessary, it is acceptable for a reasonable estimate to be the basis for claims having regard to the taxpayer's occupation and the types of expense that would be expected to be incurred. Paragraphs 42 to 55 in the Explanations section of this Ruling contain further information.

...

50. Further, for the substantiation exception to apply, the allowance must be a bona fide travel allowance. That is, the amount paid must be an amount that could reasonably be expected to cover accommodation, or meals or expenses incidental to the travel. A token amount of allowance, e.g. $5 a day to cover meals when travelling for work, would not be considered a payment that was expected to cover the purchase of three meals when travelling for work and would not be considered a travel allowance for the purposes of the exception from substantiation. What is a bona fide amount to cover accommodation or meals or expenses incidental to the travel is determined in accordance with the facts of each individual case, including the arrangements for payment of the allowance.

51. Subsection 900-50(2) of the ITAA 1997 requires that in determining what is reasonable, the Commissioner must consider what it would be reasonable to incur for the travel. In determining the reasonable amount to claim for meals, reference should be made to the period of the travel. That is, what meals (e.g., breakfast, lunch, dinner) would it be reasonable to incur from the time that travel commences to the end of that travel period given the individual employment circumstances of that taxpayer.''

Paragraph 25 sets out the daily travel allowance amounts that the Commissioner proposed as reasonable for the 1997-98 income year. For employees on an annual salary of between $68,228 and $122,136, the daily rate for ``other country areas'' was $127.65. For employers on an annual salary below $68,228 the daily rate for ``other country areas'' was $108.45.

6. The applicant submitted that he was paid a travel allowance under the award to cover his outgoings and that therefore he did not have to substantiate his deduction by getting written evidence, providing that the claim was reasonable. He submitted that his revised claim was reasonable, 59 days at $108.45, because he took the figure of $108.45 per day from TR 97/14.

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ATC 2276

7. The representative of the Respondent submitted that although the applicant received an amount of approximately $39 per day as travel allowance pursuant to a State Award, this amount did not cover his actual expenditure of $60 per day, and that therefore, the provisions of section 900-30 were not satisfied. Hence, it was submitted, the applicant could not rely on the exception to the substantiation rules and could not, without substantiation, claim the deduction.

8. The Tribunal accepts the proposition that there must be relativity between the quantum of the so-called travel allowance and the purpose for which it is said to be paid. Paragraph 50 of TR 97/14, set out above, correctly sets out the position that the allowance must be a ``bona fide'' travel allowance. A token amount, or a general payment, does not amount to a bona fide travel allowance. Nevertheless, the Tribunal does not accept the proposition that the amount paid by the employer to the employee has to equate dollar for dollar to the amount of the employee's actual expenditure before it can be classed as a travel allowance. In this context the words ``cover'' and ``covered'' relate to the subject matter to be dealt with by the allowance paid, namely accommodation and meal expenses.

9. The Tribunal does not regard the payment received by the applicant and made under an industrial award, to be a token amount. The applicant received a bona fide travel allowance. Consequently, he was entitled to claim reasonable expenses without the requirement to provide substantiation.

10. The applicant was only entitled to claim those expenses that he actually incurred. That is, 59 days at $60 per day, which works out to be $3,540.

11. The objection decision is varied to allow a deduction of $3,540 for meals and accommodation.