Ask Ban Tacs Question
As part of my job I am required to be away from home. I am away in various places within the country and for various lengths of time. My employer pays for my accomodation and pays a meal allowance of $30 dollars a day to cover the cost of all meals (which is shown on my PAYG Summary as meal allowance)I have not kept receipts for my expenses, however the allowance most certainly does not cover the costs.
Can I claim the reasonable amounts for daily travel as per the ATO rates?
Thankyou
Answer
It sounds like you already have a fair understanding of this topic. Here is a link to the current rates that the ATO consider reasonable, paragraph 11 is the table
http://law.ato.gov.au/atolaw/print.htm?DocID=TXD%2FTD201217%2FNAT%2FATO%2F00001&PiT=99991231235958&Life=20120627000001-99991231235959
This ruling also states at paragraph 3.
Verification of reasonable claims – In appropriate cases, where the substantiation exception is relied on, the employee may still be required to show:
–
how they worked out their claim;
Note the requirement to show how our worked out your claim without any guidelines as to what is acceptable.
Here is a link to those rates for last year, refer paragraph 11
http://law.ato.gov.au/atolaw/print.htm?DocID=TXD%2FTD201117%2FNAT%2FATO%2F00001&PiT=99991231235958&Life=20110629000001-99991231235959
Here is a link to the ATO ruling on travel allowances, TR 2004/6
http://law.ato.gov.au/atolaw/print.htm?DocID=TXR%2FTR20046%2FNAT%2FATO%2F00001&PiT=99991231235958&Life=20060621000001-99991231235959
In particular:
38. If the travel allowance expense or overtime meal allowance expense claimed qualifies for exception from substantiation, it is not necessary to keep written evidence as would otherwise be required under Subdivision 900-E of the ITAA 1997. The objective of the exception is to relieve taxpayers, who are covered by the exception from substantiation, from the requirement to determine claims relying on detailed calculations based on records or receipts.
39. However, a taxpayer 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 counts as evidence for a claim subject to the substantiation exception will vary according to individual circumstances and the nature of the expense. 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 expenses that would be expected to be incurred. This is a significantly lesser requirement than the need to keep written evidence.
40. A taxpayer can choose not to use the exception from substantiation. Each taxpayer can decide between maintaining fewer records and claiming the reasonable amount, which in some circumstances may be lower than the amount actually incurred, or keeping written evidence and claiming the full amount of deductible expenses incurred, which may be higher than the reasonable amount.
As you can see it does not give you exact guidelines as to what is required when you don’t have receipts. But it certainly doesn’t go as far as making you keep a diary entry for every expense. A reasonable estimate can never mean individually listing the expenses and in paragraph 39 it says:
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 expenses that would be expected to be incurred. This is a significantly lesser requirement than the need to keep written evidence.
My advice used to be, keep receipts for a day or two, possibly in different areas and use that as a representative sample.
Reently I have heard that the ATO is requiring diary notes for each day. There is no practice statement on this issue so you are at the mercy of individual auditors. Though it would seem to me that individual diary entries is going too far and contradicts paragraph 38 and 39 of TR 2004/6. If you don’t want an argument you may prefer to do this.
The ruling states
The objective of the exception is to relieve taxpayers, who are covered by the exception from substantiation, from the requirement to determine claims relying on detailed calculations based on records or receipts.
Now it would seem to me that a diary entry of every expense incurred is a detailed calculation based on records. This statement is much more likely to describe keeping receipts for a day or two and using them to estimate the rest of the trip.
Now off my soap box and back to directly answering your question you need to look up what the reasonable amount is for the places you went to, refer the TDs above. Then make a list of a typical day’s expenses or next time you are away keep receipts for a few days. Be particular about having evidence of where you were and how many days you slept away from home. Though, your employer can provide you with third party evidence. Now as long as your typical day’s expenses is less than the reasonable amount, even though it is more than the allowance paid you will be entitled to a tax deduction as per paragraph 41 of TR 2004/6. By no means is your claim limited to the allowance paid by your employer. It is limited to the amount you actually incurred if you have receipts even if this is above the reasonable allowance listed in the TDs. It is only if you do not have recepts that you are actually limited to the reasonable amount, again providing you incurred that amount or more. The only relevance that is placed on the amount your employer pays you is when testing that you have received a bon a fide allowance, which is a pre requisite of qualifying to use the reasonable amounts without receipts. This is a test of the minimum paid, the ruling quotes a daily allowance of $5 would not be considered bon a fide because it is not enough to cover meal expenses.
41. The receipt of a travel allowance or an overtime meal allowance does not automatically entitle an employee to a deduction, nor does the amount of an allowance received determine if the claim is reasonable. Only the actual amount incurred on work-related travel expenses or overtime meal allowance expenses can be claimed as a deduction.
