Mitchell and Commissioner of Taxation (Taxation)

Mitchell and Commissioner of Taxation (Taxation) [2018] AATA 2507 (27 July 2018)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s):2017/5618
Re:Richard Mitchell
APPLICANT

Commissioner of TaxationAnd
RESPONDENT

DECISION
Tribunal:Senior Member L Hespe
Date:27 July 2018
Place:Melbourne

The Tribunal affirms the decision under view.
...………………[sgd]…………………………….
Senior Member
Catchwords
meal allowance expense - deductibility - whether incurred in gaining or producing assessable income - whether of a private or domestic nature - substantiation requirements - whether requirements for reasonable overtime meal allowance exception satisfied - whether expenses covered by meal allowance
Legislation
Income Tax Assessment Act 1997
Cases
7 CTBR (NS) Case 29 155
Commissioner of Taxation v Anstis (2010) 241 CLR 443
Commissioner of Taxation v Cooper (1991) 29 FCR 177
Commissioner of Taxation v Day (2008) 236 CLR 163
Ronpibon Tin NL v Federal Commissioner of Taxation (1949) 78 CLR 47
The Roads and Traffic Authority of New South Wales v Commissioner of Taxation (1993) 43 FCR 223
Secondary Materials
Taxation Determination 2012/17
Taxation Ruling 2004/6
Oxford English Dictionary (Oxford University Press, 2^nd ed, 1989)
Explanatory memorandum to the Tax Law Improvement (Substantiation) Bill 1997
REASONS FOR DECISION
Senior Member L Hespe
27 July 2018

In the year of income ended 30 June 2013, Mr Mitchell claimed a deduction of $8,130 for overtime meals expenses. The Commissioner allowed a deduction for an amount up to the amount of overtime meal allowances included in Mr Mitchell’s assessable income (being an amount of $1,608),[1] but disallowed a deduction for the balance. Mr Mitchell seeks a review of a decision of the Commissioner disallowing his objection against the amended assessment.
[1] Amount disclosed in Mr Mitchell’s PAYG payment summary for year ended 30 June 2013 as meal allowances
FACTS
During the year of income, Mr Mitchell was employed as a site surveyor by Form 700 Pty Ltd (Form 700) during the construction of high rise buildings in Melbourne’s Central Business District. Put at its simplest, his role was to ensure everything was built according to design. If carpenters were on site, a site surveyor had to be on site.

Mr Mitchell was the sole site surveyor for the construction projects on which he worked. He was generally required to work from 7 am to 5.30 pm Mondays to Thursdays and from 7 am to 3.30 pm on Fridays. He also worked between 7 and 8 hours on Saturdays.

He was also required to start at 5.30 am every third morning after a concrete slab pour to place grid markers. This was about twice a week but sometimes was once a week. Occasionally he also worked Sundays. He had every second Monday as a rostered day off.
During the years 2011 to 2015, Form 700 was a party to an Enterprise Bargaining Agreement (EBA) with the Construction, Forestry, Mining and Energy Union. That agreement applied to Mr Mitchell’s employment with Form 700, although it had been negotiated before Mr Mitchell’s employment with Form 700 began. That EBA relevantly provided:
a)Ordinary hours of work were 8 hours per day Monday to Friday, with the notional weekly hours based on a 36 hour week[2]. The ordinary working hours were to be worked in a 10-day/2-week cycle.[3]
b)
Ordinarily daily hours could be worked between the hours of 6:00 am and

6:00 pm.[4]
c)Clause 36.2 was entitled “Overtime”. From the first pay period commencing on or after 1 March 2012, all overtime was to be paid at double ordinary time rates.[5] Subject to eligibility requirements set out in the National Building and Construction Industry Award 2000, an employee required to work overtime for one and one half hours or more after working ordinary hours must be paid an amount to meet the cost of a meal.[6] From the first pay period commencing on or after 1 March 2012, the amount to be paid was $15. From the first pay period commencing on or after 1 March 2013, the amount to be paid was $18.
d)From the first pay period commencing on or after 1 March 2012, overtime worked on a Saturday or Sunday was to be paid for at the rate of double ordinary time rates.[7] Employees required to work on a Saturday or Sunday were to be afforded a minimum 4 hours work.
[2] clause 36.1.1
[3] clause 36.5.1
[4] clause 36.1.2
[5] clause 36.2.3
[6] clause 36.2.4
[7] clause 36.2.5
Based on the terms of the EBA, eligibility for a meal allowance was determined on a daily basis, having regard to the hours worked after ordinary hours. Mr Mitchell became entitled to a meal allowance only once he completed his 8 hours of work on Mondays to Fridays. Mr Mitchell accepted that he was not paid a meal allowance on Saturdays or Sundays. Information provided to the Tribunal from Form 700 stated that Mr Mitchell was paid an overtime meal allowance during the income year ended 30 June 2013 approximately 107 times. Mr Mitchell accepted that he was paid an overtime meal allowance no more than 107 times during the 2013 income year.
Mr Mitchell’s evidence was that he bought breakfasts after setting out a grid on those mornings when he started at 5.30 am; breakfast and lunch on Saturdays and dinner on the way home.
Little evidence was provided in relation to the quantum of the outgoings incurred by

Mr Mitchell on meals. Mr Mitchell did not provide documentary evidence in support of his claim but relied upon s 900-60 of the Income Tax Assessment Act 1997 (1997 Act).

As part of his objection, Mr Mitchell said he had calculated his deduction by multiplying the amount stated by the Commissioner in Taxation Determination 2012/17 (TD 2012/17) as the “reasonable overtime meal allowance expenses” of $27.10, by 6 days a week and 50 weeks a year.
Before the Tribunal, the Applicant’s evidence was that he estimated he spent upwards of $20 on breakfast and a similar amount on lunch. His evidence was that he generally paid for his meals in cash. He usually consumed his dinner on the way home at about 6 pm. He generally did not return to work after eating dinner. Mr Mitchell’s evidence was that “personal time was precious to me as it was sparse and I spent a lot of time at work.”
Even if I were able to infer in Mr Mitchell’s favour that he incurred an outgoing for each meal he purchased in an amount that was at least equal to the reasonable meal amount set out in TD 2012/17, for the reasons set out below, Mr Mitchell is not entitled to a deduction in the amount claimed.
The working day calendar attached to the EBA disclosed that there were about 215 ordinary working days (Monday to Friday) in the financial year ended 30 June 2013 (taking into account annual leave days, public holidays and rostered days off).

Allowing for Christmas industry closedown, there were no more than 40 Saturdays in which the industry was operating. The evidence does not support 300 working days. Further, Mr Mitchell’s evidence was that aside from days in which he started early because of a slab pour, he did not generally work overtime on Fridays.
I now consider whether Mr Mitchell is entitled to a deduction for overtime meals expenses in excess of the amount allowed by the Commissioner in his objection decision.
PROVISIONS OF THE 1997 ACT
Section 8-1 relevantly provides:
General deductions
(1) You can deductfrom your assessable income any loss or outgoing to the extent that:
(a) it is incurred in gaining or producing your assessable income;
…
(2) However, you cannot deduct a loss or outgoing under this section to the extent that:
…
(b) it is a loss or outgoing of a private or domestic nature; or
…
(d) a provision of this Act prevents you from deducting it.
Section 900-15(1) provides:
(1) To deduct a * work expense:
(a) it must qualify as a deduction under some provision of this Act outside this Division; and
(b) you need to substantiate it by getting written evidence.
Subdivision 900-E tells you about the evidence you need.
To find out whether an expense qualifies as a deduction under this Act, see Division 8 (Deductions).
Section 900-30 relevantly provides:
Meaning of work expense
General
(1)  A work expenseis a loss or outgoing you incur in producing your salary or wages.
……
Meal allowance expenses included
(4)  Meal allowance expenses count as * work expenses. A meal allowance expenseis a loss or outgoing that you incur for food or drink that is covered by a * meal allowance.
(5)  A meal allowanceis an allowance that your employer pays or is to pay to you as an employee to enable you to buy food or drink. However, an allowance is not a meal allowance if it is a * travel allowance or part of one.
Section 900-60 provides:
Exception for reasonable overtime meal allowance
You can deduct a * meal allowance expense without getting written evidence if:
(a) the allowance is to enable you to buy food or drink in connection with overtime that you work; and
(b) the allowance is paid or payable to you under an * industrial instrument; and
(c) the Commissioner considers reasonable the total of the losses or outgoings you claim that are covered by the allowance.
The rules in relation to written evidence are set out in Subdivision 900-E.
Application of Section 8-1 to expenditure on overtime meals
There is no specific provision which allows an employee taxpayer a deduction for meals expenses. A deduction is allowed for outgoings on meals if the requirements of s 8-1 are satisfied.
For a loss or outgoing to be deductible under s 8-1(1)(a), it is both sufficient and necessary that the occasion of the loss or outgoing should be found in whatever is productive of the assessable income or, if none be produced, would be expected to produce assessable income.[8] Essential to the inquiry of deductibility is the identification of that which is productive of the assessable income.[9] To this end, one must ask how the assessable income was (or was expected to be) gained or produced.[10]
[8] Ronpibon Tin NL v Federal Commissioner of Taxation (1949) 78 CLR 47 at 57
[9] Commissioner of Taxation v Anstis (2010) 241 CLR 443 at [30]; Commissioner of Taxation v Day (2008) 236 CLR 163 at 179
[10] Commissioner of Taxation v Anstis (2010) 241 CLR 443 at [30]
Whilst ordinarily expenditure on meals is of a private nature (and therefore not deductible because of s 8-1(2)(b)), the occasion for the expenditure may operate to give expenditure on meals the character of a working expense so that it satisfies s 8-1(1)(a) and is not within s 8-1(2)(b).[11] It is necessary to identify a connection between the circumstances in which the expenditure on meals is incurred and the process by which the taxpayer derives assessable income.[12] Where a taxpayer incurs expenditure on meals because he or she is required by their employer and for the purposes of their employment to reside away from home and at the work site, the occasion of the outgoing can operate to stamp that outgoing as having a business or employment related character.[13] Although expenditure on meals consumed at work during ordinary hours is not ordinarily deductible, expenditure on meals consumed whilst on duty during extended hours has been regarded as incurred in gaining or producing assessable income and not of a private or domestic nature.[14]
[11] Commissioner of Taxation v Cooper (1991) 29 FCR 177 at 201
[12] Commissioner of Taxation v Cooper (1991) 29 FCR 177 at 187-188; The Roads and Traffic Authority of New South Wales v Commissioner of Taxation (1993) 43 FCR 223 at 239-240
[13] The Roads and Traffic Authority of New South Wales v Commissioner of Taxation (1993) 43 FCR 223 at 240
[14] 7 CTBR (NS) Case 29 155
I accept that Mr Mitchell worked long hours and that time constraints made the preparation of meals difficult for him. But in order for expenditure on a meal to satisfy

s 8-1(1), it is not sufficient that the expenditure was incurred because overtime was worked at some point during the day. It is necessary for the occasion of the expenditure to be found in that which is productive of assessable income.
In the present context, it is the performance of overtime work that produces assessable income, both in the form of the additional wages earned and meals overtime allowance paid. The occasion for the expenditure must be found in the performance of overtime work. For expenditure on an overtime meal to satisfy s 8-1(1), the meal must be consumed whilst performing overtime duties or consumed on a break in the course of performing those duties. The evidence was that Mr Mitchell generally finished work at 5.30 pm on Mondays to Thursdays and 3.30 pm on Fridays. He generally consumed dinner after finishing his working day. For these reason, the expenditure incurred by Mr Mitchell on dinner does not satisfy the requirements of s 8-1(1) of the 1997 Act and is not deductible.
Mr Mitchell submitted that this result was “arbitrary”. Whilst it may seem “arbitrary” for a taxpayer who works overtime to be entitled to a deduction for an overtime meal consumed whilst at work but not after leaving work, the result follows from the requirement under

s 8-1 that the occasion for the outgoing be found in that which is productive of assessable income. The connection between the meal expense and overtime work is broken if the meal is not consumed whilst performing overtime duties.
Application of substantiation requirements in Division 900
In so far as the expenditure incurred by Mr Mitchell on meals consumed whilst performing overtime on Saturdays is concerned, it is necessary to consider whether any of the exclusions in s 8-1(2) apply. In particular, whether another provision of the Act prevents Mr Mitchell from claiming a deduction. To the extent that it satisfies s 8-1(1), expenditure on overtime meals is a “work expense” because it is an outgoing incurred in producing salary or wages: s 900-30. To deduct a work expense, it is necessary that the expense not only satisfy s 8-1(1) but also that the taxpayer substantiate it by getting written evidence: s 900-15 of the 1997 Act.
Mr Mitchell did not have written evidence to substantiate his claim but relied upon

s 900-60 which allows a taxpayer to deduct a “meal allowance expense” without getting written evidence if the conditions in that section are satisfied. “Meal allowance expense” is defined in s 900-30(4) as a “loss or outgoing that you incur for food or drink that is covered by a meal allowance”. A “meal allowance” is defined in s 900-30(5) as an allowance that your employer pays to you or is to pay to you as an employee to enable you to buy food or drink.
Mr Mitchell was paid a meal allowance by his employer on at least 107 occasions during the 2013 income year. For present purposes, I also accept that he incurred outgoings on food or drink. However, to be a meal allowance expense, it is necessary that the outgoings be “covered by” a meal allowance.
Counsel for the Commissioner referred to the definition of “cover” in the Oxford English Dictionary. The definition included:
15.a. To be extensive enough to include or comprehend; to include within its application.
18.a. To be sufficient to defray (a charge or expense) or to meet (a liability or risk of loss); to counterbalance or compensate (a loss or risk) so as to do away with its incidence; to be or to make an adequate provision against (a liability); to protect by insurance or the like.
The Commissioner submitted that the second of these definitions was not applicable and that the amount of the overtime meal allowance paid to an employee does not act as a cap on the amount that can be claimed as an overtime meals expense. I accept this submission. It is consistent with the legislative history and in particular, with the explanatory memorandum to the Tax Law Improvement (Substantiation) Bill 1997.
To determine whether an outgoing on food or drink is “covered by” a meal allowance, it is necessary to examine the circumstances in which the meal allowance was paid by the employer. In Mr Mitchell’s case, his employer paid a meal allowance only if an employee was required to work overtime for one and a half hours after working ordinary hours. His employer did not pay a meal allowance for work performed on the weekend. Mr Mitchell’s meal allowance did not “cover” his breakfasts purchased when starting early (because that food or drink was not consumed after working ordinary hours). Nor did the meal allowance cover his meals purchased on Saturdays. The expenses incurred by Mr Mitchell therefore did not satisfy the definition of meal allowance expense in s 900-30(4) and did not satisfy s 900-60.
I have also considered each of the conditions set out in s 900-60(a) to (c). I accept that Mr Mitchell was paid an allowance to buy food or drink in connection with overtime that he worked. I also accept that the allowance was paid under an industrial instrument as defined in s 995-1 because his EBA was an industrial agreement in force under Australian law. Section 900-60(c) requires that the “Commissioner considers reasonable the total of the losses or outgoings you claim that are covered by the allowance.” The only amounts that the Commissioner can consider reasonable for the purposes of s 900-60(c) are losses or outgoings that are covered by the allowance. As set out above, Mr Mitchell’s meal allowance did not “cover” his breakfasts purchased when starting early. Nor did the meal allowance cover his meals purchased on Saturdays.
Taxation Determination TD 2012/17 and Taxation Ruling TR 2004/6
Mr Mitchell submitted that it was sufficient for the substantiation exception that he incurred expenses on food and drink because he worked overtime, that he received a bona fide meal allowance from his employer and that his claim did not exceed the reasonable amount set per meal. He referred to paragraph 1(a) of TD 2012/17 and to paragraph 52 of Taxation Ruling 2004/6 (TR 2004/6).[15] TD 2012/17 is entitled “Income Tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2012-13 income year?” Paragraph 1(a) appears under the heading “Ruling” and states:
(1)This Determination sets out the amounts the Commissioner considers are reasonable (reasonable amounts) for the substantiation exception in Subdivision 900-B of the Income Tax Assessment Act 1997 (ITAA 1997) for the 2012-13 income year in relation to claims made for:
(a) overtime meal allowance expenses – for food and drink in connection with overtime worked and where a meal allowance has been paid under an industrial instrument;
…
[15] Mr Mitchell referred to paragraph 52 of Taxation Ruling TR 2004/6 in submissions provided to the Tribunal after the hearing. The Commissioner did not oppose the Tribunal considering these submissions.
I do not consider that either TD 2012/17 or TR 2004/6 can be taken as varying or relaxing the requirement that the outgoing for food or drink be “covered by a meal allowance”. Rulings and Determinations must be read as a whole. Paragraph 2 of TD 2012/17 states that it “should be read together with Taxation Ruling TR 2004/6”. That taxation ruling applies “where [overtime meal expenses] are covered by an allowance paid by the person’s employer”.[16] The requirement for expenses to be “covered by an overtime meal allowance” in order to be relieved from the substantiation requirements is referred to in

TR 2004/6.[17] However, I observe that it may have been preferable if paragraph 1 of

TD 2012/17 had more closely followed the statutory language and included a reference to “covered by”.
[16] paragraph 2
[17] see, for example, Taxation Ruling 2004/6 at paragraphs 9 and 13 of the Ruling section. It also appears in paragraphs 37 and 50 of the Explanation section.
It is necessary to understand the purpose of the “reasonable amount” provided for in

TD 2012/17. Merely because a taxpayer receives a meal overtime allowance does not entitle a taxpayer to claim a deduction for a “reasonable amount” for meals. Rather, it is necessary for a taxpayer to demonstrate that (a) they incurred outgoings on overtime meals, (b) the circumstances in which those outgoings were incurred satisfied the requirements of s 8-1 and, (c) in the absence of satisfying the substantiation requirements set out in Subdivision 900-E, the requirements of s 900-60 were met.

In the present case, the Commissioner, on objection, allowed Mr Mitchell a deduction equal to the amount of the overtime meal allowance included in his assessable income. The Commissioner did not suggest that the Tribunal should deny a deduction for any of the amount so allowed. I note that the effect of allowing a deduction in this amount is to put Mr Mitchell in the same position as those taxpayers who are accorded the benefit of the concession made in paragraph 12 of TR 2004/6 and paragraph 3 of TD 2012/17 (which states that employees are not required to show overtime meal allowances and overtime meal allowance expenses in their tax returns in certain circumstances).
For these reasons, the decision under review is affirmed.

I certify that the preceding 33 (thirty - three) paragraphs are a true copy of the reasons for the decision herein of Senior Member L Hespe

............................[sgd]............................................
Associate
Dated: 27 July 2018

Date(s) of hearing: 15 June 2018

Date final submissions received: 18 June 2018

Applicant: Self-represented

Counsel for the Respondent: Ms Fiona Cameron

Solicitors for the Respondent: Mr Benjamin De Santis

[2018] AATA 2507

27 July 2018

Key Legal Topics

Areas of Law

Tax Law

Statutory Interpretation

Legal Concepts

Statutory Construction

Appeal

Date(s) of hearing:	15 June 2018
Date final submissions received:	18 June 2018
Applicant:	Self-represented
Counsel for the Respondent:	Ms Fiona Cameron
Solicitors for the Respondent:	Mr Benjamin De Santis