Deduction for meals against Sleepover Allowance

Can the taxpayer claim a deduction for meal expenses under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) against a sleepover allowance paid by the taxpayer's employer?

No. Expenditure in connection with food and drink was not incurred in gaining or producing assessable income as is of a private nature and therefore not deductible under section 8-1 of the ITAA 1997.

As a condition of employment in a government agency, the taxpayer is occasionally required to stay overnight at their employer's premises.

A sleepover allowance was paid to the taxpayer as compensation for the additional expenses incurred while sleeping at the employer's premises.

Additional expenses incurred by the taxpayer included the cost of meals.

A sleepover allowance is paid as compensation for the additional expenses and inconveniences the taxpayer suffers as a result of occasionally spending the night at their place of employment. A sleepover allowance is a payment in the nature of salary and wages and is included in assessable income under paragraph 26(e) of the Income Tax Assessment Act 1936 .

A sleepover allowance is not a living-away-from-home allowance because the recipient is not considered to be living away from their usual place of residence within the meaning of subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986 . A person will not be regarded as living away from home if their work location does not change or if they merely spend a night, or a few nights, away from their usual place of residence because of work. Nor can the sleepover allowance be considered to be a travel allowance as the duties performed as part of the taxpayer's employment continue to be conducted at the same site.

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.

The payment of an allowance does not automatically entitle the taxpayer to a deduction. The expense must be incurred in the course of producing assessable income ( Amalgamated Zinc (De Bavay's) Ltd v. FCT (1935) 54 CLR 295; (1935) 3 ATD 288; [1936] ALR 67).

The meaning of 'incurred in gaining or producing assessable income' was considered in Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 56 ALR 785; (1949) 8 ATD 431. The High Court stated that: 'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words "incurred in gaining or producing the assessable income" mean in the course of producing such income.'

Expenditure on the daily necessities of life (e.g., food and drink) are generally not deductible (unless the outgoing gives the expenditure the essential character of a working expense) as it is not incurred in gaining or producing assessable income and is also private or domestic in nature.

The expenditure incurred by the taxpayer on meals is not incurred in gaining or producing assessable income and is also private or domestic in nature. The cost of the meals is therefore not deductible under section 8-1 of the ITAA 1997 against the sleepover allowance received.