On 3 July 2013 the ATO released details of the reasonable travel and overtime meal allowance expense amounts for 2013-2014 income tax year (TD 2013/16).
The determination sets out the amounts that the Commissioner considers are reasonable for the substantiation exception in Subdivision 900-B ITAA 1997 for the 2013-2014 income year. For the 2013-2014 year the reasonable amount for overtime meal allowance expenses is $27.70.
What this means is that an employer can pay to its employees a bona fide overtime meal allowance up to this reasonable amount without any records required. As long as the allowance has been fully expended the employee is not required to keep supporting evidence and can deduct the full cost up to the reasonable overtime meal allowance rate.
This is an effective tax planning tool for any business owners who are employed by their Company or Trust and engage in regular overtime work and the allowance is paid in line with an award or agreement.
Take for example Bob who is employed by his company Bob’s Transport Pty Ltd. Bob works overtime three days per week in his business. Under his award his employer Bob’s Transport Pty Ltd pays him an overtime meal allowance up to the reasonable amount of $27.70 per day for the 2013-2014 year. The total allowance payable for the year will be $3,988.80, calculated as follows:
$27.70 x 3 days per week x 48 weeks (allowing 4 weeks annual leave) = $3,988.80
The $3,988.80 Allowance is claimable as a tax deduction for the company. Since Bob has fully expended the allowance each day he is not assessed on this income in his Individual Tax Return. Effectively, this Allowance provides for a tax free payment of income to Bob the business owner.