Travel for work? Your tax time may have just gotten easier

Each year the ATO issues a ruling detailing what it considers a reasonable travel allowance. If you are paid a travel allowance by your employer and don’t claim more than the reasonable amount, you are not required to keep written evidence or travel records.

Nevertheless, an ATO auditor will require you to prove you spent the money and the burden of proof inflicted by ATO auditors on employee taxpayers is so high, you are probably better to keep receipts for all expenses for the whole year.

A new decision by the Administrative Appeals Tribunal has eased the burden on those claiming travel allowances on their tax returns.Credit: Michael Howard

In a recent Administrative Appeals Tribunal (AAT) case, Daniel Shaw, an employee long-distance truck driver, said he had spent more than the ATO’s reasonable amount of $105.75 a day, but on advice of his accountant, only claimed that much so that he would not be required to keep written evidence.

The ATO auditor in this case decided it was not satisfied with the records Shaw had, so denied him any deduction at all for food or drink while he was travelling.

There was no question that Shaw was away from home for 310 days as this information was recorded in his logbook and his employer paid him an allowance for each of those days. The ATO auditor simply decided that, as Shaw did not have receipts for all his meal expenses, he was not allowed any tax deduction.

In effect, the ATO argued that he did not need to eat even though he was away from home a week at a time and the law said he did not need written evidence.

Maintain full substantiation of meal expenses for a short period in each year.

Administrative Appeals Tribunal ruling

On objection, the ATO conceded that he would have had to eat so it allowed him $19 a day despite the reasonable allowance being far higher. Shaw produced a year’s worth of bank statements to show transactions supporting the expenditure and a logbook showing when breaks were taken.

Most taxpayers would have given up rather than take on the ATO taxpayer-supported fighting fund. You can’t help thinking that was part of the ATO plan.

The tribunal was scathing of the ATO’s attitude, stating that $19 a day was absurdly inadequate, and it was not realistic to criticise Shaw for not being able to itemise individual expenses five years after the event.

Further, the evidence provided by Shaw was sufficient to provide a methodology to estimate the amount that had been expended, particularly when to do otherwise was to act so unrealistically. The requirement is only on the balance of probabilities, not beyond doubt.

The case provided some great guidance on what the tribunal considered acceptable supporting evidence: “Maintain full substantiation of meal expenses for a short period in each year. This could comprise receipts of meals and receipts showing the specific groceries acquired for the trip, clear evidence of food acquired being in the truck (e.g. phone photos), bank statements and diaries to demonstrate periods away from home, meal breaks etc for a short period in a year.”

With June 30 fast approaching, if you travel overnight for work start keeping this representative sample. Alternatively, ask your employer not to put the travel allowance on your PAYG summary. They don’t have to if it is the reasonable amount or less, and they believe you would have fully expended the amount.

The tribunal also accepted that sometimes cash would be needed to buy food. Further, it was practical to buy groceries before actually leaving home to ensure he had enough food in the truck in case, and that this expenditure is to be included.

But don’t get too excited that common sense has prevailed – the ATO has appealed against this case.

Julia Hartman founded BAN TACS Accountants more than 30 years ago and is still passionate about all things tax.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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