The ATO has issued Tax Determination TD 2021/6 which sets out the reasonable allowances for the 2021/22 year for meals and domestic and overseas travel paid to employees, company directors or office holders.
Where the amount paid falls within the relevant reasonable allowance, the person is not required to substantiate the expenses. However, the ATO still requires some written records be kept to show the allowance was expended.
Note any expenditure on accommodation overseas must be fully substantiated.
Overtime meal allowances
The reasonable overtime meal allowance for the 2021-22 year is $32.50. Tax Determination TD 2021/6 provides the following example that shows the tax treatment of overtime meal allowances.
Example
Samantha works for the local government. She is asked to work overtime one night to complete an urgent task. Samantha works her eight-hour day followed by four hours of overtime. Samantha receives an overtime meal allowance of $14.98 pursuant to her agreement, which is shown on her payment summary. During the overtime, Samantha takes a rest break to get a meal and returns to continue her overtime. Samantha spends $20 on her meal.
Because Samantha has spent less than the reasonable amount for overtime meal expenses, she can claim a deduction for the $20 she spends and she is not required to substantiate the expenditure (for example, get and keep the receipt for the meal).
If Samantha's tax return is checked by the ATO, she may be asked to explain her claim for the deduction. To do this, Samantha would show that she worked overtime, that she was paid an overtime meal allowance under an industrial instrument, that she correctly declared this allowance as income in her tax return, and that she costed her meal at $20 based on the cost of the meal she purchased from a nearby Thai restaurant.
If Samantha had spent more than the reasonable amount and wanted to claim the higher amount that she spent, she would need to get and keep the receipt for the meal.
If Samantha's overtime meal allowance was not shown on her payment summary and she fully spent the allowance, she can choose to leave it out of her tax return and not claim a deduction for the meal she purchases when working overtime.
Domestic travel allowances
Tax Determination TD 2021/6 contains the schedules for 2020-21 domestic travel allowances.
The Determination covers accommodation, meals and incidental expenses. The allowances are covered by three salary ranges and destination of travel. If money is expended for travelling within the allowances no substantiation is required.
The reasonable amount for accommodation applies only for short stays in commercial establishments like hotels, motels and serviced apartments. If a different type of accommodation is used (for example, a hostel or caravan park), the reasonable amount cannot be used even if you receive an allowance.
The reasonable amount for meals depends on the period and time of travel. That is, the reasonable amounts only apply to meals (that is, breakfast, lunch and dinner) that fall within the time of day from the commencement of your travel to the end of your travel that is covered by the allowance. For example, if you leave at 10.00am on Monday and return home at 3.00pm on Tuesday, you can apply the reasonable amounts for lunch and dinner on Monday and breakfast and lunch on Tuesday.
The reasonable amount for incidentals 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.
The ATO explains the tax treatment of the allowance in Example 2 which is extracted below.
Example
Svetlana is an accountant earning $145,000 a year. As part of her duties, she is required to travel to and work in Sale for four days and three nights each month. Svetlana's employer pays for her accommodation directly and gives her a meal and incidental allowance of $80 per day for the four days of travel. This allowance is shown on her payment summary. Svetlana's usual pattern is to eat three times a day, spending $20 on breakfast, $25 on lunch and $40 on dinner (that is, a total of $85 per day). Svetlana calculates the daily reasonable amount for meals and incidentals as follows:
- Table 2 of this Determination applies because Svetlana's salary is between $129,251 and $230,050
- Sale is listed as a Tier 2 country in Table 5 of this Determination
- Table 2 of this Determination provides reasonable amounts for Tier 2 country centres as $117.25 per day for meals and $29.45 per day for incidentals (that is, a total of $146.70 per day).
Because Svetlana has spent less than the reasonable amount on meals and incidentals, she can claim a deduction for the $85 per day that she spends on meals and she is not required to substantiate the expenditure (for example, get and keep all of the receipts for the meals). Svetlana cannot claim anything for accommodation because her employer paid for it.
If Svetlana's tax return is checked by the ATO, she may be asked to explain her claim for the deduction. To do this, Svetlana would show she travelled to and worked in Sale for four days each month, that she received an allowance for the meals and incidentals for each day she travelled, that she correctly declared this allowance as income in her tax return, and that she typically spent $85 a day on meals and incidental expenses (for example, by reference to diary entries, bank records and receipts that she kept for some of the trips).
If Svetlana had spent more than the reasonable amount on meals and incidentals and wanted to claim the higher amount that she spent, she would need to get and keep all of the receipts.
If Svetlana's meal and incidental allowance was not shown on her payment summary and she fully spent the allowance, she can choose to leave it out of her tax return and not claim any deductions for the meals and incidentals that she purchases while travelling and working in Sale.
