John Duncan, a long-haul truck driver, recently found himself at the centre of a tax dispute over meal-related deductions. He initially claimed $28,200 in tax deductions for food and drink expenses while on the road, but ultimately received only $8,393. This case serves as a key learning opportunity for truck drivers and businesses that employ them, highlighting the importance of substantiating expenses and understanding the rules surrounding travel allowances.
For the year ending June 30, 2021, Duncan spent 282 days on the road, with 141 of those nights spent away from home. Under his employment agreement, he received a travel allowance of approximately $41 per day when away from home during meal breaks. According to Australian tax law, travel allowances for long-haul workers can be used to claim deductions for related expenses, such as food, without requiring receipts—provided the expenses are considered “reasonable” by the Australian Tax Office (ATO).
For the relevant tax year, the ATO deemed it reasonable for an individual to spend up to $105.75 per day for all meals combined. Duncan told his accountant that he typically spent $100 per day on food while driving, and based on this, his accountant claimed a deduction of $28,200 for the 282 days he was on the road. Additionally, the accountant advised that receipts were unnecessary due to the travel allowance rules.
However, the ATO later questioned the deduction, and the case was brought before the Administrative Appeals Tribunal (AAT). After reviewing the facts, the AAT allowed only a $8,393 deduction for Duncan’s meals. The primary reason for the reduction was the AAT's interpretation of the travel allowance. The tribunal ruled that the $41 daily allowance paid to Duncan was intended to cover accommodation costs, not food and drink, as it was not provided when accommodation was already arranged. As a result, Duncan was not able to use the allowance to substantiate his meal expenses.
The AAT also made a key distinction between incurring and substantiating deductions. While certain tax provisions allow individuals to claim deductions without receipts, the onus is still on the taxpayer to prove that the expenses were actually incurred. Duncan was unable to provide an acceptable method for calculating his daily meal costs, which led to the disallowance of much of his claimed deduction.
For anyone in the trucking industry or managing drivers, this case serves as a reminder that receiving a travel allowance does not automatically entitle one to a full deduction. It’s crucial to ensure that any expenses claimed can be clearly substantiated, even if receipts are not available. When estimating daily costs, a reliable method must be established to justify the amounts being claimed, especially when dealing with tax authorities.
If you need advice on claiming deductions or any aspect of the Australian taxation system, contact us to book a consultation with one of our tax experts.
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