Travel Allowances ATO ruling

[albatross710]

I'm a keen reader of the ATOs annual ruling "Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2012-13 income year?". I read the document in the context of being a self-employed business owner whom travels overseas on business.

My understanding of this document is that it provides a maximum 'unsupported' claim amount for daily allowances while I am away travelling on business.

Key things that I rely on:

Tax return treatment - Where a travel or overtime meal allowance which does not exceed the reasonable amounts is not shown on the payment summary, and it has been fully spent on deductible expenses, neither the allowances nor the expenses need be shown on the employee's tax return. If an amount less than the allowance has been spent, the income tax return must include the allowance and the expense claimed. Whenever a claim is made for overtime meal or travel allowance expenses the allowance must also be included in the tax return.​

· Substantiation exception - Where the amount claimed is no more than the applicable reasonable amount, substantiation of the claim with written evidence is not required.​

I take this to mean that I always spend up to the reasonable amount and do not collect the receipts. I am also prepared not to claim a deduction in the event that my expenses are higher than the allowance.

I'd be interested to understand how other people calculate these types of claims. I'll put up a sample itinerary.

Saturday: Leave Brisbane on a TG flight to Zurich, arrive the following morning
Sunday: Rest and Recover
Monday : Meetings and presentations on Bahnhofstrasse.
Tuesday : Meetings then depart 5pm to Milano, Italy, arrive that night
Wednesday : Attend fashion show, meet suppliers
Thursday : Attend fashion events, meet suppliers
Friday : Attend Fashion events, view suppliers' warehouses
Saturday : Check out, 11am depart from Malpensa via SQ to SIN
Sunday morning : Arrive SIN 6am, stay night in Singapore
Monday: Supplier meetings in Singapore, depart 9pm back to Brisbane
Tuesday: Arrive BNE 10am ish.

Basing the allowance on where I would spend each 'hotel night' I get the following:

Switzerland (cost group 6) : 2 nights
Italy (cost group 5): 4 nights
Singapore (cost group 5) : 1 night

All up for Food (exc accom) = 2 nights @ $280/day + 5 nights @ $230/day = $1,430
All up for incidentals = 7 nights @ $50 = $350
Total allowance payable $1,780

(Non-taxable, not included on Payment summary and not requiring receipts)


Like all good tax rulings there is some uncertainty on my part on how to handle this section:

Meal expenses 9. The reasonable amount for meals depends on the period and time of travel. That is, the rates only apply to meals (that is breakfast, lunch, dinner) that fall within the time of day from the commencement of travel to the end of travel covered by the allowance. Incidental expenses 10. The reasonable amount applies in full to each day of travel covered by the allowance, without the need to apportion for any part-day travel on the first and last day.

I wonder if I can claim the travel as applying from the time of departure from home port and the final night returning to home port? does anyone have insight on that?

What are the downsides of paying myself at the maximum reasonable rates?


Alby

 

[harvyk]

I've always read it as from the moment you leave home, to the moment you arrive back home, with the proviso that it would need to be considered reasonable timings.

For example if you had a flight leaving at 8pm, and you left home and sat around the airport for 14 hours for no reason, I think you'd have trouble claiming both your breakfast and lunch, but dinner would probably be considered reasonable. You'd also get the full daily incidentals allowance ($30 or what ever that is) on your departure day. So if for example it was a daily incidentals allowance of $24 (to make things easy), you'd still get the full $24, even if you left home at 6pm (where by if you did need to apportion an amount, it would most likely be $6 you'd get).

Using your sample itin

11 days of incidentals,
However for your meals, each meal would be for the country which you are either in, or travelling to at the meal time. I've always been advised that the fact you where supplied a meal on the plane doesn't seem to matter when determining allowances (you may have chosen not to eat it, and as such purchased a meal before departure). So using the first Tuesday, breakfast and lunch would be cost group 6, whilst dinner would be cost group 5.

Of course, from a legal point of view you'd have needed to have actually spent the money to claim it, you just don't need proof that you did spend the money. From a realistic point of view, I'm pretty sure most people simply pocket (or drink at the bar) any allowance money that they didn't spend.

Of course standard disclaimer applies, speak to your accountant etc...

 

[albatross710]

11 days of incidentals,
However for your meals, each meal would be for the country which you are either in, or travelling to at the meal time. I've always been advised that the fact you where supplied a meal on the plane doesn't seem to matter when determining allowances (you may have chosen not to eat it, and as such purchased a meal before departure). So using the first Tuesday, breakfast and lunch would be cost group 6, whilst dinner would be cost group 5.

I like those thoughts, definitely going to stop posting pictures of airline meals if I've taken a bite.

 

[medhead]

Probably a different situation but I've only ever been paid incidentals by employers based on a full 24 hours rather than a calendar day. ie leave at 6pm and incidentals can only be claimed a 6 pm the following day.

Generally employer payment of these allowances matches the ATO rules wrt claiming reasonable travel expenses.


Sent from the Throne

 

[burmans]

Probably a different situation but I've only ever been paid incidentals by employers based on a full 24 hours rather than a calendar day. ie leave at 6pm and incidentals can only be claimed a 6 pm the following day.

Generally employer payment of these allowances matches the ATO rules wrt claiming reasonable travel expenses.


Sent from the Throne

Probably an accountant question but I've been led to believe you get this only on days you sleep away from home so you can claim for the leaving but not arriving day of a multi day trip.

 

[markis10]

Pretty easy to work out:

The reasonable amount for meals depends on the period and time of travel. That is, the rates only apply to meals (that is breakfast, lunch, dinner) that fall within the time of day from the commencement of travel to the end of travel covered by the allowance.

And


For travel allowance expenses - The employee must sleep away from home.

 

[harvyk]

Probably a different situation but I've only ever been paid incidentals by employers based on a full 24 hours rather than a calendar day. ie leave at 6pm and incidentals can only be claimed a 6 pm the following day.

I've always been paid based on reasonable meal times based on the timezone I was in. So if it was reasonable for me to have eaten breakfast and lunch in the timezone I was in, but I arrived home before dinner time, then I'd be paid an allowance for brekky and lunch, but not dinner.

Probably an accountant question but I've been led to believe you get this only on days you sleep away from home so you can claim for the leaving but not arriving day of a multi day trip.

I've never received an allowance for single day trips, which is a little annoying as these can easily cost similar amounts in incidentals as o'nighters (although even then the incidentals allowance rarely covers it fully). I usually find the biggest incidental to be transport to \ from the airport at each end. Once I'm at a location I am usually close to where I need to get to \ bus or train can easily get me to area's I need to get to pretty cheap. From airports there is rarely any cheap public transport options (ADL is so far the exception I have found)

 

[Simsy85]

Oddly enough my TA doesn't come up on my Group Certificate anymore... It used to...

 

[markis10]

Oddly enough my TA doesn't come up on my Group Certificate anymore... It used to...

It needs to be shown otherwise this ruling is not applicable.

 

[medhead]

I've always been paid based on reasonable meal times based on the timezone I was in. So if it was reasonable for me to have eaten breakfast and lunch in the timezone I was in, but I arrived home before dinner time, then I'd be paid an allowance for brekky and lunch, but not dinner.

My comment was limited to incidentals allowance. Certainly I've claimed on a per meal basis, within some time restrictions, ie return before 6:30pm no dinner. But incidentals have required a full 24 hours before being eligible, meaning it can't be claimed for the first day of travel.


Sent from the Throne

 

[trippin_the_rift]

Our TA is calculated on the number of hotel nights booked. There's no expense when you're sleeping on a plane...

 

[albatross710]

Oddly enough my TA doesn't come up on my Group Certificate anymore... It used to...

It doesn't need to according to the ATO document : Travel allowances and PAYG withholding

I

f the allowance is paid at the same rate or below the 'reasonable travel allowance' rate, and the allowance is separately accounted for, no withholding is necessary. In addition, the travel allowance does not need to be shown on an employee's payment summary.

Probably a different situation but I've only ever been paid incidentals by employers based on a full 24 hours rather than a calendar day. ie leave at 6pm and incidentals can only be claimed a 6 pm the following day.

Generally employer payment of these allowances matches the ATO rules wrt claiming reasonable travel expenses.


Sent from the Throne

According to the ATO policy, they recognise that there may be a difference between what an employer pays and what the tax office will allow.

I've never received an allowance for single day trips, which is a little annoying as these can easily cost similar amounts in incidentals as o'nighters (although even then the incidentals allowance rarely covers it fully). I usually find the biggest incidental to be transport to \ from the airport at each end. Once I'm at a location I am usually close to where I need to get to \ bus or train can easily get me to area's I need to get to pretty cheap. From airports there is rarely any cheap public transport options (ADL is so far the exception I have found)

My understanding is that travel arrangements at the destination are not intended to be covered by this policy. This covers for meals and incidentals like drycleaning, having to buy a new toothbrush at a 711 because you left one at home etc. I also put in a separate expenses claim with receipts for train fares, taxi fares. I admit I usually let some slip through.

 

[Stephen65]

My understanding is that travel arrangements at the destination are not intended to be covered by this policy. This covers for meals and incidentals like drycleaning, having to buy a new toothbrush at a 711 because you left one at home etc. I also put in a separate expenses claim with receipts for train fares, taxi fares. I admit I usually let some slip through.

That's my understanding too. Transport costs such as getting to/from the departure airport, getting to/from the arrival airport and travel around the destination city are not intended to be covered by this allowance. So you should record these separately and claim 100% of the cost of these costs.

 

[burmans]

I've never received an allowance for single day trips, which is a little annoying as these can easily cost similar amounts in incidentals as o'nighters (although even then the incidentals allowance rarely covers it fully). I usually find the biggest incidental to be transport to \ from the airport at each end. Once I'm at a location I am usually close to where I need to get to \ bus or train can easily get me to area's I need to get to pretty cheap. From airports there is rarely any cheap public transport options (ADL is so far the exception I have found)

I don't think these rulings say you can't be paid for expenses on a single day trip, just that you need to substantiate these with actual written expense records and hence you would be paid via receipts rather than receive an "allowance". Of cpurse receipts may be better than an allowance in some circumstances!

 

[albatross710]

I don't think these rulings say you can't be paid for expenses on a single day trip, just that you need to substantiate these with actual written expense records and hence you would be paid via receipts rather than receive an "allowance". Of cpurse receipts may be better than an allowance in some circumstances!

That makes sense and seems reasonable.

The employer may then have their own issues to deal with regarding tax deductibility of the nature of the expense.

 

[medhead]

Single day trips were eligible for allowances at my last employer provided I either left before 7am or returned after 7pm. (Might have also had to be away for lunch, I can't remember). It this case only the individual meal allowance could be claimed. I actually did this a few times driving to the iron triangle and back in a day. Only problem is my boss refused to approve the claim - he thought it was poor form or something.

 

[serfty]

Time to brush up on this thread to ensure you get your rightful deductions.

TD 2012/17 - Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2012-13 income year? (As at 19 September 2012)

 

[cove]

In the next 6 weeks I get to visit each State office at least once so Serfty's post is timely.

 

[albatross710]

Just enjoyed 7 days on the full allowance in Manila. More than covered my diet of fish and rice (joking).

 

[tim374]

Make sure your travel allowances are separate items on your payment summary, you don't want to lose the substantiation exemption as per paragraph 59 of TR 2004/6. If anybody was like me they'd spend less on expenses than the allowance paid, so the exemption is good to have.