Overtime meal expenses

Whether a taxpayer may claim a deduction under section 8-1 (Income Tax Assessment Act 1997 (ITAA 1997)) for expenses relating to overtime meals incurred over several prior years where the taxpayer has received an overtime meal allowance for the earlier income years which is paid as a lump sum in the current year.

Yes. The taxpayer is entitled to claim a deduction for overtime meal expenses incurred in the years in which the taxpayer actually incurred the expenses, provided the amendment period has not expired.

The taxpayer works overtime on a regular basis. The taxpayer receives a lump sum payment, for overtime meal allowances the taxpayer accrued pursuant to an industrial award, over several prior years. The payment of some $5,000 is calculated on the basis of approximately $8 per meal. During those income years the taxpayer did incur expenses in relation to food and drink when working overtime, spending approximately $6 per meal.

While expense allowances received by an employee from an employer are generally assessable income to the employee, an employee is entitled under section 8-1 (ITAA 1997) to a deduction for expenditure incurred in gaining or producing assessable income. If the employee's expenses are incidental and relevant to the employment, are not of a capital, private or domestic nature and the substantiation requirements are met, the outgoings can be deductible.

The general rule is that no deduction is allowable for expenses incurred by an employee on food and drink for which a meal allowance (that is not a travel allowance) is paid unless the employee obtains written evidence of the expenses. An important exception to this rule applies if the employee receives an overtime meal allowance and the Commissioner considers the total of the expenses claimed to be reasonable.

An overtime meal allowance is an allowance paid or payable under an Australian law or industrial award for the purpose of enabling an employee to buy food or drink in connection with overtime. Generally the Commissioner releases a Taxation Ruling (for example Taxation Ruling TR 2000/13) setting out the amounts the Commissioner considers reasonable in respect of claims made for overtime meal expenses for a particular income year. Where a taxpayer receives an overtime meal allowance and the expenses claimed by the taxpayer are less than the reasonable amount (as set out in the ruling for the income year in which the meal expense was incurred) the cost of the taxpayer's overtime meals may be deductible without the requirement for written evidence (section 900-60 (ITAA 1997)).

In the present case, the taxpayer has received an overtime meal allowance pursuant to an industrial award and the total expenses claimed by the taxpayer amount to approximately $6 per meal. The Commissioner considers these expenses reasonable and the cost of these overtime meals can, therefore, be deducted without the requirement for written evidence. Where, as in this case, the actual expenditure is less than the allowance received, the whole allowance is assessable and expenses are deductible only to the extent actually incurred.

The overtime meal expenses are deductible only in the income year in which they are incurred. In order to claim the overtime meal expenses incurred in the prior years, the taxpayer must apply to the Commissioner for an amendment to the relevant assessments (section 170 (ITAA 1936. Generally, a taxpayer can apply for an amended assessment at any time within 4 years of the due date for payment of the original assessment.