TAXATION AND REVENUE - income tax - deductions - employee truck driver - work-related expenses - relief from substantiation - decision set aside and substituted

Income Tax Assessment Act 1997 ss 8-1,900-30, 900-50, 900-200

Commissioner of Taxation v Cooper [1991] FCA 164; (1991) 29 FCR 177; (191) [1991] FCA 164; 21 ATR 1616

Re Fardell and Commissioner of Taxation (2011) 85 ATR 812; [2011] AATA 725

Re McIntosh and Federal Commissioner of Taxation (2001) 47 ATR 1242; [2001] AATA 702

Roads and Traffic Authority of New South Wales v Commissioner of Taxation [1993] FCA 314; (1993) 43 FCR 223

Taxation Ruling TR 2004/6 - Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses

Taxation Determination TD 2010/19 - Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2010-11 year?

Taxation Ruling TR 95/18 - Income tax: Employee truck drivers - allowances, reimbursements and work-related deductions

1. Mr John Gleeson is a full-time employee truck driver. He is in dispute with the Commissioner as to whether he is entitled to claim certain work-related expenses as deductions in his income tax return for the year ended 30 June 2011 (Relevant Year). Specifically, Mr Gleeson claimed deductions for the cost of food and drink consumed by him at roadhouses and service stations along the interstate routes driven by him as a truck driver. He also claimed other work-related expenses, most of which were resolved before or on the day of the hearing.
2. Mr Gleeson did not keep any receipts for his purchases of food and drink. He is relying on the relief from the substantiation provisions in the income tax law on the basis that he was in receipt of travel allowances from his employers in the Relevant Year. Accordingly, Mr Gleeson based his claim for the deductions on the Commissioner's reasonable daily rates.
3. The Commissioner audited Mr Gleeson and was of the view that he was not in receipt of travel allowances that allow him relief from the substantiation provisions and, therefore, he could not use the Commissioner's reasonable daily rates. The Commissioner disallowed Mr Gleeson's claims for these deductions (as well as other claims). Mr Gleeson objected to the assessment and his objection was allowed in part only. He then applied to the Tribunal for a review of the Commissioner's objection decision.
4. The question for the Tribunal is whether the Commissioner's objection decision is correct.
5. I am of the view that Mr Gleeson is entitled to claim the deductions for the food and drink expenses. I have also decided that Mr Gleeson is entitled to claim a deduction for his entire claim with respect to his mobile phone expenses.

1. The following issues are before the Tribunal:
   • (a) Is Mr Gleeson entitled to a deduction under s 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for food and drink expenses of $19,297 for the Relevant Year?
   • (b) Did Mr Gleeson receive a travel allowance, as defined, in s 900-30(3) of the ITAA 1997 for the Relevant Year?
   • (c) Has Mr Gleeson substantiated his claims for work travel expenses or is he entitled to rely on the exception from the substantiation provisions in s 900-50 of the ITAA 1997 for the Relevant Year?
   • (d) Is Mr Gleeson entitled to a deduction under s 8-1 of the ITAA 1997 for mobile phone expenses of $1,500 for the Relevant Year?
2. It is noted that, at the audit stage, the Commissioner had allowed as a deduction $4,135 for food and drink expenses and this was said to have been allowed by him in error. That is to say, Mr Gleeson's total food and drink expense claim in his tax return for the Relevant Year was originally for $23,432 but because of the error the Commissioner says he made, he has agreed not to disturb the deduction that has already been allowed. The amount of work-related travel expense in dispute is therefore $19,297.
3. A number of other deductions that were in dispute were conceded by the Commissioner. Specifically, by letter dated 16 October 2013, the Commissioner's legal representatives wrote to Mr Gleeson's representative and stated that Mr Gleeson was entitled to claim the deductions for his laundry expenses ($144), torch batteries ($27) and truck cleaning expenses ($116). Also, on the day of the hearing, the Commissioner accepted that Mr Gleeson was allowed to claim $1,120 for mobile phone expenses based on the payments to the mobile phone carrier shown in his bank statements totalling that amount. (Mr Gleeson's claim was for $1,500 and I canvass the position in relation to the balance of that claim below.) Additionally, the Commissioner allowed a deduction for $836 for his laptop computer, representing 75% of that expense, as was claimed by Mr Gleeson.
4. Furthermore, the Commissioner stated that the administrative penalties of $2,254.60 should be remitted in full.

THE RELEVANT LAW AND THE COMMISSIONER'S RULINGS

1. The provisions of the ITAA 1997 that are relevant are set out below, followed by some relevant extracts from the Commissioner's rulings.

1. Section 8-1 of the ITAA 1997 is the operative provision that allows deductions for expenses incurred in gaining or producing assessable income, including work-related travel expenses. Section 8-1 of the ITAA provides:

81 General deductions

(1) You can deduct from your assessable income any loss or outgoing to the extent that:

(a) it is incurred in gaining or producing your assessable income; or

(b) it is necessarily incurred in carrying on a *business for the purpose of gaining or producing your assessable income.

1. In order to deduct a "work expense", you need to substantiate it. A "work expense" is a "loss or outgoing you incur in producing your salary or wages" (s 900-30(1) of the ITAA 1997), and a "travel allowance expense" is also a "work expense".
2. A "travel allowance expense" is a "loss or outgoing you incur for travel that is covered by a *travel allowance", and must be for accommodation, food, drink or incidental to the travel (s 900-30(2)). You do not need to keep written evidence of a "travel allowance expense" if the Commissioner considers the amount that is covered by a "travel allowance", is reasonable (s 900-50). This concession in the income tax law is referred to as the relief from the substantiation provisions or the substantiation exception.
3. "Travel allowance" is defined in s 900-30(3) of the ITAA 1997 as follows:

(3) A travel allowance is an allowance your employer pays or is to pay to you to cover losses or outgoings:

(a) that you incur for travel away from your ordinary residence that you undertake in the course of your duties as an employee; and

(b) that are losses or outgoings for accommodation or for food or drink, or are incidental to the travel.

1. It is necessary to also refer to s 900-200 of the ITAA 1997 which is in the following terms:

900200 Reasonable expectation that substantiation would not be required

Not doing something necessary to follow the rules in this Division does not affect your right to deduct an amount if the only reason was that you had a reasonable expectation that you would not need to do it in order to be able to deduct that amount.

1. The amount of "travel allowance expense" that the Commissioner considers reasonable is released in annual taxation determinations or rulings. Applicable to the current period in dispute, the 2011 tax year, is Taxation Determination TD 2010/19 - Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2010-11 year? (TD 2010/19). That determination is a public ruling for the purposes of the Taxation Administration Act 1953 (TAA).
2. Broadly, TD 2010/19 sets out the amounts that the Commissioner considers are reasonable for the substantiation exception in Subdivision 900-B of the ITAA 1997 for the 2010-11 income year in relation to claims made for, amongst other things, travel allowance expenses for employee truck drivers namely, food, drink and incidentals that are covered by the allowance. Paragraph 2 of TD 2010/19 relevantly states that "[t]his Determination should be read together with Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses [TR 2004/6] which explains the substantiation exception and the way in which these expenses are able to be claimed." Furthermore, the Commissioner notes in TD 2010/19 citing paragraph 33 of TR 2004/6 that "'[i]n setting the reasonable amount ... the Commissioner does not determine the amount of allowance an employee should receive or an employer should pay their employees. The amount of an allowance is a matter to be determined between the payer and the payee'".
3. Paragraph 3 of TD 2010/19 then refers to "[k]ey points from TR 2004/6 about claiming travel allowance expenses" and includes the following:
   • ...
   • Allowance must be paid - The substantiation exception only applies if the employee is paid an overtime meal allowance or a travel allowance. The allowance must have an identifiable connection with the nature of the expense covered.
   • For travel allowance expenses - The employee must sleep away from home.
   • Substantiation exception - Where the amount claimed is no more than the applicable reasonable amount, substantiation of the claim with written evidence is not required.
   • ...
4. Paragraph 12 in TD 2010/19 is relevant in relation to the reasonable travel allowance expense allowed by the Commissioner for employee truck drivers. The Commissioner's daily rate is set by reference to the salary range as indicated in the table in that paragraph:

12. Amounts claimed up to the food and drink component only of the reasonable domestic daily travel allowance amounts for 'other country centres' are considered to be reasonable for meal expenses of employee truck drivers who have received a travel allowance and who are required to sleep away from home. For the 2010-11 income year, the relevant amounts are:

1. There is a footnote reference in the table that states "[f]or further information on truck drivers refer to paragraphs 72 to 75 of Taxation Ruling TR 2004/6 and Taxation Ruling TR 95/18".

1. The most relevant paragraphs of TR 2004/6 for present purposes are as follows:

Travel allowance expenses

18. For domestic or overseas travel allowance expenses to be considered for exception from substantiation, the employee must be paid a bona fide travel allowance. The allowance must be paid to cover work-related travel expenses incurred for travel away from the employee's ordinary residence, undertaken in the course of performing duties as an employee (subs 900-30(3) of the ITAA 1997) and which involves sleep away from home. The work-related travel expenses must be for accommodation, or food or drink, or expenses incidental to the travel.

19. A travel allowance that is not paid or payable to cover specific work-related travel is not considered a travel allowance for the purposes of the exception from substantiation.

...

Employee truck drivers who receive a travel allowance

72. An employee truck driver who, in the course of earning his or her income, is required to sleep away from home, is considered to be travelling for work and may incur meal expenses as part of a work-related travel expense... The Commissioner sets out each year the reasonable amounts for food and drink expenses incurred by employee truck drivers as part of a travel allowance expense.

73. Subsection 900-50(2) of the ITAA 1997 requires that, in determining what is reasonable, the Commissioner must take into account the total losses or outgoings it would be reasonable to incur for accommodation, food or drink, or expenses incidental to the travel. In determining the reasonable amount to claim for meals, reference should be made to the period of the travel. That is, what meals (for example breakfast, lunch, dinner) would it be reasonable to incur from the time the travel commences to the end of the travel period, given the individual employment circumstances of the taxpayer.

74. ...

75. The receipt of a travel allowance does not automatically entitle the employee truck driver to a deduction for travel expenses, nor does the amount of a travel allowance received determine if the claim is reasonable. Only the actual amount incurred on work-related travel expenses can be claimed as a deduction.

Employee truck drivers who do not receive a travel allowance

76. Claims for work-related travel expenses by employee truck drivers who are required to sleep away from home and who do not receive a travel allowance, must be substantiated...

[Emphasis in original]

1. There is an additional ruling which specifically applies to employee truck drivers referred to as Taxation Ruling TR 95/18 - Income tax: employee truck drivers - allowances, reimbursements and work-related deductions (TR 95/18) and it canvasses, among other things, the assessability of allowances received by truck drivers and the deductibility of work-related expenses incurred by truck drivers. The substantiation provisions in relation to claims for travel expenses are also discussed in this ruling.
2. At paragraph 173 of TR 95/18 the Commissioner notes that the Tax Law Improvement (Substantiation) Act 1995 introduced new rules in relation to substantiation of expenses which took effect from 1 July 1994. The Commissioner then sets out a number of factors which affect the application of the substantiation provisions to a truck driver at paragraph 194. These include:
   • whether a travel allowance was received;
   • whether the claim for travel expenses covered by the travel allowance exceed the reasonable amount;
   • whether it is reasonable to expect the truck driver to obtain documentary evidence for certain travel expenses.
3. At paragraph 202 of TR 95/18, the Commissioner sets out the following table regarding the substantiation requirements for travel expenses incurred after 30 June 1994:

Expenses claimed must satisfy subsection 51(1) of the Act.

If the claim is no more than the reasonable amount, no substantiation is required.

If the claim is more than the reasonable amount, the whole claim must be supported by written evidence.

Expenses claimed must satisfy subsection 51(1) of the Act.

The whole claim must be supported by written evidence.

THE EVIDENCE OF MR JOHN GLEESON AND THE PAYROLL MANAGER

1. In the Relevant Year, Mr Gleeson received a total of $12,163 as "allowances", as shown in his PAYG payment summaries from his employers.[1] Mr Gleeson claimed deductions of $23,432 that relate to the cost of food or drink while travelling away from home. The latter figure was reached by multiplying the number of times that he says he slept away from home, being 276 times, by the amount of $84.90, being the Commissioner's daily rate applicable to employee truck drivers in the salary range of $97,001 and below (see TD 2010/19 and table at paragraph 12 cited above).

1. Mr Gleeson said that he has been driving trucks for about 40 years. Relevantly, he drives a 26 metre long truck - a B-double, which he explained as being a prime mover and two trailers. In the Relevant Year, Mr Gleeson worked as an employee truck driver for three different companies known as RMILH Pty Ltd, ICELH Pty Ltd and RMCLH Pty Ltd (the Three Employers), all of which were subsequently deregistered as companies, as they went into liquidation. Mr Gleeson drove the interstate routes out of a base in Sydney to Melbourne, Adelaide and Brisbane.
2. Because of the size of the truck, he was restricted as to where he could park it for breaks. He said that he slept in his truck or at the depots on the nights he was away from home because there are no motels where you can park such a truck, so he claimed no amounts for accommodation. He said "the only place I can really park the truck for meals is in the service station. So I'm stuck with service station meals, and unfortunately service station meals are not cheap".[2]
3. He explained that his truck has a chiller under the bed where he stores drinks to keep them cool but that you cannot keep food in there, as it does not last when he is away for a number of days; also it is a small drawer, not a fridge. As to the food that Mr Gleeson consumed on the days that he was away from home, he said he ate "a lot" and that he purchased it from the service stations and roadhouses on his routes. He said in terms of amount spent, it depended, that is to say, it could be in excess of $100 or it could be $70 or $80. He put it this way:[3]

... you've got to remember that I'm in a truck ... I'm in the truck right around the clock. If I start at say, five o'clock in the afternoon and then I've got to have tea and then I've got to have a break at midnight and then a break at three o'clock in the morning; and then you've got breakfast and you've got to have lunch and then your afternoon tea. And like, its 24 hours I've got to eat.

1. Mr Gleeson confirmed that besides his three meals a day, he also had many snacks between meals, in part as a measure for fatigue management and because he also had to stop to take breaks after a certain number of hours of driving. He said that he did not smoke and that it was necessary to constantly eat. He was over 6ft in height and of a solid build weighing approximately 120 kilos.[4] I mention his physical appearance as it tended to corroborate the fact that he ate a lot.
2. He provided as an example of the costs of meals that he bought a cup of coffee and a "little, tiny wrap ... with bacon in it" for $10.50. He said coffee cost $5.50 a cup at most service stations.
3. Mr Gleeson did not keep his receipts for his food and drink purchases. He said he was told by his former tax agent that "as long as you don't go splurging on your meals you won't need to produce receipts".[5] He proceeded on that basis because he considered that he was relieved from the substantiation provisions on the premise that he was paid a "travel allowance" by each of the Three Employers. He, therefore, considered that it was unnecessary for him to keep receipts and records to comply with the substantiation requirements as his deduction was quantified by claiming the Commissioner's reasonable daily rates.
4. He also did not keep any diary or other records of his expenses, at least not for the Relevant Year. He said he used cash or his debit card to pay for his purchases at service stations. A review of some bank statements in the T-documents filed with the Tribunal pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 as modified by s 14ZZF of the TAA, (apparently produced in relation to other expenses claimed as deductions) showed numerous purchases at service stations that were not for petrol and likely, according to Mr Gleeson, to have been for food and drinks. They were for expenses at service stations on his interstate routes which supported the fact that they were for food and drink expenses incurred by him while working away from home.
5. Because Mr Gleeson had not kept any records, his current tax agent procured from Mr Gleeson's Three Employers all the records that that he could get for the Relevant Year and he reconstructed a combined spreadsheet showing the trips that Mr Gleeson would have undertaken in the Relevant Year. This was a quite a praiseworthy task especially as it also sought to enumerate the meals that Mr Gleeson would have consumed, however, the records of the Three Employers that were referenced were not complete because the companies had gone into liquidation and other difficulties emerged with the information contained in the spreadsheet.
6. The Commissioner's representative cross-examined Mr Gleeson in relation to the number of occasions that he claimed to have been away from home. The Commissioner suggested that Mr Gleeson slept away from home only on 89 occasions. This number had been calculated by reference to the spreadsheet and by working out the places which were interstate. The following exchange is relevant in that regard[6]:

For the income year ended 2011, the Commissioner understands that you were away from home on 89 occasions, is that correct?---No, it was a lot more than that.

What is the answer?---Well, I'd go away on the Sunday night and probably not get back until the Saturday morning. If I go to Brisbane that's two days; from Brisbane back down to Adelaide there's four, four and a half to five days. And then from there across to Melbourne and then back up again you might be in the truck for a week.

Have you worked out how many nights you were away from home?---With the previous accountant I had.

And what is the answer?---I can't remember.

1. I asked Mr Gleeson if he could recall how he had worked out the number of occasions he slept away from his ordinary residence for the Relevant Year at the relevant time that the claim had been made in his income tax return. He responded as follows[7]:

Yes, I went off my logbook sheets, and the trips that I do I know whether I went home. Like, if I was going to Brisbane and back I know that if I was getting in at ten o'clock in the morning - because it's 45 minutes to home and back - it's pointless me going home and back because I lose an hour and a half's sleep so I would sleep in the depot which is just a bed available for you. So, because the truck's ready at five o'clock to take over to TNT or Tyler's or wherever I go and you drop the trailers off and you didn't know with the trips - if I was doing an Adelaide run the same thing, because Adelaide when you get back is a seven-hour turn-around; I've got to have a seven-hour minimum break. So it's pointless going home, and if you're going to have a sleep and you do another 1,500 kilometres, that's a 1,000 per day, one over - you only claim one over - you get a decent sleep if you sleep at the depot, whether it's in Adelaide or Melbourne or Brisbane, or sometimes in the truck itself.

...

On the logbooks, you go through the logbook sheets and you work on your kilometres. Like, from here to Brisbane it's 1,000 kilometres, so I'm away a day, straightaway, because you can't get back. Legally I cannot drive any more than 14 hours. So you go up there, you stay up there, and you're there for a day. The trip then can be straight to Adelaide; that's two and a half days. So you can see on the logbook when it is that I come back into Sydney, it will tell me when I'm back in Sydney. Then you see what the break is to the next day or to the next trip. If it's sort of like 24 hours well then I know I was home for that period, you know. There's - obviously you're at home. But if it's, say, like in Adelaide when I go over to Adelaide I get in at 12 o'clock, I'm due back out at seven o'clock that night to take the trailers over; that's my seven-hour minimum break. I've just drive 1,000 kilometres over my limit, I drive 1,000, that's 2,000 kilometres - which if I don't go to bed I'm going to have an accident. So you either - I have two choices: I can sleep in the driver's room or if I'm running late I can drop the trailers over at Tyler's and then I take the truck around to TNT at Minto BP and I'll have a sleep in the truck for my seven hours.

1. Mr Gleeson also explained that he would have reviewed the logbooks after the end of the Relevant Year and informed his former tax agent as to the relevant number of days. He also explained that he did not keep the logbook sheets because "I'm only, by law, by the RTA's law, 28 days I keep it. I never thought that I'd [need] to keep the logbook sheets".[8]

1. The payroll manager of the Three Employers provided signed letters addressed "[t]o whom it may concern" dated 7 July 2010[9], 18 February 2011[10] and 30 June 2011[11], respectively, confirming that Mr Gleeson's "runs are based out of Sydney to either Melbourne or Adelaide averaging approximately 4500 to 5000 kms per week". It was the same payroll manager that signed all three letters. These letters also stated as follows:[12]

He is also away from home several nights approximately 5 nights one week and 6 nights the next week.

...

If you would like to confirm this verbally please call me on the number above.

1. There were attachments to the letters that showed the amounts of "all allowances" paid to Mr Gleeson for each week in the Relevant Year.[13] It was clear that the amounts paid as allowances were calculated by reference to the number of kilometres travelled multiplied by 5 cents per km. For example, in the week of 1 August 2010, Mr Gleeson was paid an allowance of $250.35 being for 5,007 km. The attachment also generally confirmed that Mr Gleeson travelled between 4,500 and 5,000 km per week.
2. There was another letter from RMCLH Pty Ltd dated 28 September 2011 addressed to the ATO, by the same payroll manager, which relevantly stated as follows[14]:

This letter is to confirm that as per John's 2010- 2011 PAYG summary the full amount of $4135 paid to John as an allowance is solely for travel allowance.

Travel allowances are calculated by multiplying the $0.05 cents x the amount of kms he has travelled. John averages approximately 5000 kms per week. Based on this PAYG summary John has travelled 82,700 kms between 22/2/11 and 30/6/11.

If you need further explanation or clarification please contact me on the above number.

1. The Commissioner did not require the payroll manager to attend to be cross-examined nor was there any indication from the Commissioner's representative at the hearing that the Commissioner was concerned with the content of these letters. Notwithstanding, it is clear that the Commissioner considered that these letters from the payroll manager were necessary for the review of his objection decision as they were amongst the T-documents.
2. In his objection decision dated 2 May 2012, the Commissioner wrote as follows:

We spoke to your payroll manager in relation to the allowance you received and she advised that you are paid a rate of 5 cents per kilometre for every kilometre travelled.

The allowance you received is not considered to be a bona fide travel allowance and furthermore the allowance you received would not reasonably cover the costs of meals or incidental expenses in accordance with paragraph 60 of TR 2004/6.

1. I accept that the payroll manager's letters were a true record of the factual circumstances. First, the statement that Mr Gleeson was paid a rate of 5 cents per kilometre for every kilometre travelled is corroborated by what the Commissioner recorded as the payroll manager telling him in his objection decision (referred to at paragraph 41 of this decision). Secondly, the payroll manager's statement that Mr Gleeson travelled between 4,500 and 5,000 kilometres per week on interstate trips is consistent with the tally of the "allowances" paid to Mr Gleeson and Mr Gleeson's evidence. Thirdly, the payroll manager's statement that Mr Gleeson spent five days away from work one week and six days the next week equates to Mr Gleeson being away from his ordinary residence approximately 11 days out of every fortnight, that is, an estimated 286 days in the Relevant Year. Mr Gleeson had told his former tax agent that he was away from home 276 days in the Relevant Year.
2. I found Mr Gleeson to be an honest witness. He candidly acknowledged at the hearing his difficulties in recalling some of the details. He was also forthright in pointing out that the spreadsheet which, as noted above, had been prepared by his current tax agent was inaccurate, at least in some respects. For example, when taken to some of the trips in the spreadsheet, he said that these were not representative of his routes in the Relevant Year raising doubts about the information that was contained in the spreadsheet at least insofar as was provided by one of the Three Employers. In the circumstances I could not rely on the spreadsheet for the purpose of counting the number of trips that were said to be interstate trips in the Relevant Year.
3. I find that Mr Gleeson spent 276 days away from his ordinary residence as a long distance truck driver during the Relevant Period. He said he provided that figure to his former tax agent on the basis of logbooks he had at the time but that he no longer had these and I accept his explanation as to how the days were calculated. It accords with the payroll manager's estimate of the number of days away from home, on interstate work which, as noted above, I also accept to be reliable and unchallenged by the Commissioner. Mr Gleeson's own evidence was consistent with the payroll manager's letters.
4. I find that he spent "a lot" on food and, as he candidly acknowledged in cross-examination, the amount depended and varied, sometimes it was in excess of $100 and sometimes it was $70 or $80. Accordingly, I accept that the amounts claimed to have been expended (on average, in excess of $84.90 per day) were in fact incurred.

ARE MR GLEESON'S FOOD AND DRINK EXPENSES DEDUCTIBLE?

1. There are a number of Court and Tribunal decisions that have determined that food and drink expenditure will not ordinarily be deductible as a work-related expense because there isn't the necessary connection between the expense and the taxpayer's income earning activities. A deduction will be denied if the expense is incurred for an item that is of private or domestic nature.
2. In Commissioner of Taxation v Cooper [1991] FCA 164; (1991) 29 FCR 177; (1991) 21 ATR 1616, the Full Federal Court considered whether the cost of purchasing additional food and drink, that is, over and above mere sustenance, that a professional rugby league player consumed at the direction of his coach in order not to lose weight during the off-season was an allowable deduction. In separate judgments, the majority, Lockhart and Hill JJ held that the expenditure was not deductible either because it was not expenditure incurred in gaining assessable income or, alternatively, that it was expenditure of a private nature. Hill J stated at 200 as follows:

... the fact that the employee is required, as a term of his employment, to incur a particular expenditure does not convert expenditure that is not incurred in the course of the income producing operations into a deductible outgoing.

1. In Roads and Traffic Authority of New South Wales v Commissioner of Taxation [1993] FCA 314; (1993) 43 FCR 223 at 240 Hill J held that there are exceptional cases:

... [w]here a taxpayer is required by his employer, and for the purposes of his employer, to reside, for periods at a time, away from home and at the work site, and that employee incurs expenditure for the cost of sustenance, or indeed other necessary expenditure which, if the taxpayer had been living at home, would clearly be private expenditure, the circumstance in which the expenditure is incurred, that is to say, the occasion of the outgoing operates to stamp that outgoing as having a business or employment related character.

1. The Commissioner accepts this position and as evident from the rulings referred to above (see, for example, TR 95/18 paragraphs 91-100) states that employee truck drivers are entitled to deductions for meals only when on trips which require them to sleep away from home and, in the absence of such a requirement, the expenditure must necessarily be regarded as private in nature.
2. On the basis of my finding that Mr Gleeson incurred expenses in relation to food and drinks while on trips away from home, it follows that he is entitled to claim a deduction for those expenses incurred: s 8-1 ITAA 1997.

1. The Commissioner argued that the allowances paid by the Three Employers to Mr Gleeson failed to meet the requirements of being a "travel allowance", as defined in s 900-30(3) of the ITAA 1997. The Commissioner submitted that to be a "travel allowance", the payment must be a "bona fide travel allowance"; by which he meant the payment must be referable to the costs of accommodation, meals or expenses incidental to the travel and not a generic payment. More specifically, the Commissioner says that the allowances that Mr Gleeson received from all Three Employers cannot be characterised as "travel allowances" for the following reasons:
   • (a) The allowance was paid on a per kilometre rate, as opposed to on the basis of the expected costs of travel;
   • (b) The allowance was paid for every trip and therefore included occasions where Mr Gleeson was on a trip that did not require him to sleep away from his residence;
   • (c) The allowance was paid for the distance travelled for smaller day trips;
   • (d) On the basis set out above, travel away from home was not sufficient of itself to qualify for the allowance; Mr Gleeson received the allowance every time he drove the truck;
   • (e) It is highly likely that, on instances Mr Gleeson was required to sleep away from home, some of the meals would have been consumed at Mr Gleeson's residence, such as breakfast prior to commencing a shift or dinner after he returned home;
   • (f) The presence of a per kilometre rate, paid on all occasions, suggests that the allowance was not paid to cover the costs of food, drink and other expenses incidental to travel.
2. In the case of Re McIntosh and Federal Commissioner of Taxation (2001) 47 ATR 1242; [2001] AATA 702, the taxpayer submitted in that case that he was paid a travel allowance under the award to cover his outgoings and, therefore, he did not have to substantiate his deduction by getting written evidence provided that the claim was reasonable. The Commissioner submitted that even though the taxpayer received an amount of approximately $39 per day as an allowance pursuant to a state award, "this amount did not cover his actual expenditure of $60 per day and that, therefore, the provisions of s 900-30 were not satisfied. Hence, it was submitted, the applicant could not rely on the exception to the substantiation rules and could not, without substantiation, claim the deduction". Most significantly, the Tribunal held as follows:

The tribunal accepts the proposition that there must be relativity between the quantum of the so-called travel allowance and the purpose for which it is said to be paid. Paragraph 50 TR 97/14 ... correctly sets out the position that the allowance must be a "bona fide" travel allowance. A token amount, or a general payment, does not amount to a bona fide travel allowance. Nevertheless, the tribunal does not accept the proposition that the amount paid by the employer to the employee has to equate dollar for dollar to the amount of the employee's actual expenditure before it can be classed as a travel allowance. In this context the words "cover" and "covered" relate to the subject matter to be dealt with by the allowance paid, namely accommodation and meal expenses.

1. The Tribunal found that the taxpayer received a "travel allowance" (in that case, $39 and his actual expenditure was $60), rather than being paid a token amount. Consequently, the Tribunal accepted that the taxpayer in that case was entitled to claim reasonable expenses without the requirement to substantiate the expenses.
2. In Re Fardell and Commissioner of Taxation (2011) 85 ATR 812; [2011] AATA 725, the Tribunal held that the allowance paid to Mr Fardell, a long distance truck driver, was not a travel allowance but rather, a "loading" payable for the inconvenience or hardship of long distance truck driving. Mr Fardell was, therefore, not able to rely on the relief from the substantiation provisions.
3. The Tribunal found in that case that "the allowance became payable whenever the applicant drove his vehicle for more than five hundred kilometres. The derivation of the allowance did not depend on any expenditure on food and drink at roadhouses. In fact, we find that the allowance (so-called) is more accurately described as a 'loading', payable in recognition of the inconvenience or hardship involved in long-distance driving". The Tribunal, having found that the allowance was simply a "loading" paid to Mr Fardell for travelling long distances, went on to hold that the exception from the substantiation provisions in the income tax law did not apply.
4. In Mr Gleeson's case, it is clear that the allowance was calculated by reference to the kilometres that he travelled, that is, 5 cents per kilometre and it appears, as the Commissioner contends, that he was paid for every kilometre that he drove. That also emerges from what the Commissioner says the payroll manager told him as set out in the Commissioner's objection decision. However, just because it was calculated in that way does not determine what it was paid for. Regardless of what the allowance was named or how it was calculated, one has to look at the purpose of the payment and the circumstances in which it was paid.
5. The only evidence that I have in relation to what the allowance was paid for is the uncontested evidence of the payroll manager, namely, the letters referred to in paragraphs [37] and [39] above. As noted above, the Commissioner clearly accepted the letters were necessary for the determination of the issues by the Tribunal as he chose to put them into the T-documents.
6. Significantly, those letters vouch for Mr Gleeson working on interstate trips and staying away from home about 11 out of 14 nights. That is to say, he was away from his ordinary residence for significant periods throughout the Relevant Year. That would explain why he was paid the 5 cents per kilometre every time he drove his truck because as Mr Gleeson said, and as the payroll manager separately confirmed, he was virtually always staying away from home.
7. For the above reasons, the allowances received by Mr Gleeson are "travel allowances", that is to say, they were amounts paid by the Three Employers to him to cover his losses or outgoings incurred for travel away from his ordinary residence and for losses or outgoings for food or drink. This is clear from the payroll manager's letters (see paragraphs [37] and [39] above). The natural meaning to be given to the words "allowance" and "cover" in s 900-30(3) is that the amount allowed is for the purpose of dealing with the employee's losses or outgoings that are work-related travel expenses. I agree with the views of the Tribunal in Re McIntosh that the amount paid by the employer to the employee does not have to equate to the amount of the employee's actual expenditure before it can be classed as a "travel allowance". There is no suggestion in s 900-30(3) that to be a travel allowance the employer has to pay an amount that reimburses the employee for the expenses. The Commissioner rightly acknowledges that the amount of an allowance is to be determined between the employer and the employee (see TR 2004/6 paragraph 33).

IS MR GLEESON RELIEVED FROM THE SUBSTANTIATION PROVISIONS?

1. As I have decided that Mr Gleeson was paid "travel allowances", it follows that he is entitled to the relief from the substantiation provisions. Accordingly, he does not have to substantiate his claim in respect of the expenses incurred for them to be allowable as deductions: s 900-50(1) of the ITAA 1997.
2. Even if I am wrong about the allowances being "travel allowances", I am of the view that Mr Gleeson is entitled to relief from the substantiation provisions pursuant to s 900-200. As noted above, this section states that a taxpayer's right to deduct an amount is not affected "if the only reason was that you had a reasonable expectation that you would not need to do it [to substantiate the expenses incurred]".
3. Mr Gleeson acknowledged that he did not attempt to comply with the substantiation provisions because he considered that he was relieved from them. That he had a reasonable expectation that he did not need to substantiate the expenses incurred can be objectively determined, based on a number of factors, including, most importantly, that he says he was advised this by his former tax agent who prepared and lodged his relevant tax returns, including for the Relevant Year. That Mr Gleeson could have such a reasonable expectation is also reinforced by the Commissioner's rulings on the topic, including those paragraphs of the rulings extracted above (see, for example, TD 2010/9 paragraph 3, TR 2004/6 paragraph 72-73, and TR 95/18 paragraphs 173 and 202) about the substantiation exception where employee truck drivers receive travel allowances - Mr Gleeson had some general knowledge about these tax rulings and certainly understood this aspect even if he did not fully understand the details of the rulings.
4. In circumstances where Mr Gleeson was told he was paid "travel allowances" by his payroll manager of the respective Three Employers and he was told by his tax agent that he did not have to substantiate his food and drink expenses, and the Commissioner issued tax rulings which canvassed amongst other things, the substantiation exception related to the receipt of "travel allowances", I conclude that the terms of s 900-200 of ITAA 1997 are satisfied. Accordingly, Mr Gleeson is alternatively relieved from substantiating his food and drink expenses under s 900-200.

IS MR GLEESON ENTITLED TO A DEDUCTION FOR HIS MOBILE PHONE EXPENSES?

1. As noted above, the Commissioner was prepared to allow Mr Gleeson deductions only for the amounts which he proved he had paid to the mobile phone carrier, by reference to his bank statements. These were typically $125 per month but occasionally varied slightly by a couple of dollars, above or below that amount. Only $1,210 was proven by reference to the bank statements in the T-documents.
2. I accept Mr Gleeson's evidence that he was on a plan with his mobile phone carrier and paid roughly the same amount per month, that is to say, based on twelve months multiplied by $125 he incurred mobile phone expenses of $1,500 in the Relevant Year. He said that his personal phone calls were very limited and they were only to his wife. While Mr Gleeson did not produce the bank statements to support the claims for mobile phone expenses for each month in the Relevant Year, I accept that he incurred the expenses as they are recurring expenses and the total amount claimed was based on the regular monthly amount of $125 per month. I see no reason to apportion any of his claim for any personal use as it would have been minuscule.

1. In my view, Mr Gleeson's assessment was excessive. Accordingly, the Commissioner's objection decision is set aside and, in substitution, Mr Gleeson's objection is allowed in full.

I certify that the preceding 66 (sixty-six) paragraphs are a true copy of the reasons for the decision herein of Senior Member G Lazanas

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[4] Applicant's Statement of Facts, Issues & Contentions [5]