The Administrative Appeals Tribunal (‘AAT’) has in Mitchell v FCT held that a taxpayer was not eligible to deduct meal expenses in excess of his overtime meal allowance.
The taxpayer was an employee site surveyor who was employed under an enterprise bargaining agreement (‘EBA’), which stipulated certain ordinary hours of work as well as overtime.
In accordance with the EBA, he was entitled to a meal allowance when he worked overtime for one and a half hours or more after working his ordinary hours on a weekday.
No meal allowance was paid in respect of overtime worked on a Saturday or a Sunday.
He was paid an overtime meal allowance 107 times during the income year totalling $1,608.
Whilst this meal allowance was assessable, the ATO allowed a deduction for the same amount.
However, the taxpayer claimed a deduction for $8,130 for overtime meal expenses incurred on 300 days.
This amount was based on the breakfasts the taxpayer bought when he was required to start working at 5:30am, breakfasts and lunches on Saturdays and dinners on the way home.
There was little documentary evidence to support the deductions claimed, with the taxpayer instead relying on the substantiation exception afforded when using the Commisioner’s reasonable daily overtime meal allowance amounts.
The AAT rejected the taxpayer’s claim for a number of reasons, including:
- The taxpayer made a claim based on 300 days, however the working day calendar attached to the EBA showed only 215 ordinary working days and no more than 40 Saturdays in which the industry was operating.
- With regards to the dinners consumed on the way home after finishing his workday, these lacked the required connection to his income producing activities.
In these circumstances, the meal had to be consumed whilst performing overtime duties, or on a break in the course of performing overtime duties and not after finishing the working day, otherwise the connection between the meal expense and the overtime work would be broken.
- The AAT also held the breakfasts and the Saturday meals were not deductible as they were not ‘covered’ by the meal allowance.
Furthermore, it was reiterated that “merely because a taxpayer received a meal overtime allowance did not entitle them to claim a deduction for a ‘reasonable amount’ for meals.”
Specifically, for the relevant meal expense to be deductible, a taxpayer must demonstrate that:
- outgoings on overtime meals have been incurred;
- these outgoings have the sufficient connection to the derivation of the taxpayer’s assessable income and are not private in nature; and
- either satisfy the written evidence requirements or the substantiation exception requirements.
If you have a query regarding meal allowances, or want further information, please contact one of our tax accountants on (02) 9223 9166 to discuss. Alternatively, you can submit an online enquiry form.