Issue
Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for overtime meal expenses where the overtime meal allowance is folded-in as part of their ordinary wages?
Decision
No. The taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for overtime meal expenses where the overtime meal allowance is folded-in as part of their ordinary wages.
Facts
The taxpayer is an employee receiving salary and wage income.
As part of workplace agreement negotiated with the taxpayer's employer a meal allowance was folded-in as part of the taxpayer's ordinary wages.
No meal allowance was included as a separate item on the taxpayer's Payment Summary.
The taxpayer incurred meal expenses while working overtime.
Reasons for Decision
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. A deduction will also not be allowable if another provision of the Act prevents it.
The cost of meals is generally considered to be a private expense and not deductible under section 8-1 of the ITAA 1997 unless the expense is considered to be a work expense incurred in producing salary or wages. Meal allowance expenses are work expenses if they are incurred for food or drink and are covered by a meal allowance (subsection 900-30(4) of the ITAA 1997). A meal allowance is an amount that the employer pays to an employee to enable the employee to purchase food or drink (subsection 900-30(5) of the ITAA 1997).
Section 32-5 of the ITAA 1997 provides that any loss or outgoing in respect of providing entertainment will not be deductible under section 8-1 of the ITAA 1997. Entertainment is defined to include food or drink (subsection 32-10(1) of the ITAA 1997).
However, section 32-50 of the ITAA 1997 at item 5.1 provides that section 32-5 of the ITAA 1997 will not apply to prevent a deduction if; • the purchase of food or drink is in connection with overtime worked by a taxpayer; and • the taxpayer receives an allowance under an industrial instrument to buy the food or drink.
An industrial instrument includes an award or industrial agreement (section 995-1 of the ITAA 1997).
Taxation Ruling TR 2001/4 deals with what are considered to be reasonable allowances for the 2001-2002 income year. Paragraph 79 of TR 2001/4 provides that an amount for overtime meals that has been folded-in as part of normal salary or wages (e.g., under a workplace agreement) is not considered to be an overtime meal allowance.
As the taxpayer has not received a separate overtime meal allowance in connection with a specific overtime occasion, they have not received an allowance for the purposes of section 32-50 of the ITAA 1997.
Accordingly, the taxpayer is not entitled to claim a deduction for overtime meal expenses under section 8-1 of the ITAA 1997.