Changes have been made in drafting the Employee Accommodation, Food, and Drink Expenses rules. On 17 February 2021, the Australian Taxation Office (ATO) created a new addition to business tax deductibility related to accommodation and food and drink (travel only) spending. Employees who stay away from their usual residence for work purposes (for less than 21 days) were also included.
It looks as though the ATO is standing by a three-week rule of thumb in the withdrawn Tax Ruling IT 112 to ascertain the difference between ‘travelling’ and ‘living away from home’.
Deductibility of accommodation, food and drink expenses
Draft TR 2021/D1 proposes that the accommodation, food, and drink expenses would only be business tax deductible in some instances. An employee can only make deductions in the cases in which:
- they suffer the expense in earning their income
- the expense is not of a capital, private or domestic nature
- the expense is not created while earning exempt income
- an aspect of the Act does not disallow it from being deducted.
Travelling for work or living cost
The draft states that accommodation, food and drink expenses are usually private fees. However, where an employee travels and stays away from their usual home overnight as part of their duties to perform their roles, these expenses can be business tax-deductible under section 8-1. It must have a close connection to employee performance.
Time living away for work
Usually, the longer an employee spends away from home, the more it could become classed as a living location, and business tax rules could change.
The draft changes to the Act could affect you and your business, so it is crucial to talk to a business tax accountant who knows the rules. Accountant 2 Business specialises in all things business tax, and is across the necessary guidelines within this draft. Reach out to ask any questions.
The information in this article is general in nature and might not be right for your circumstances. Please arrange a meeting with one of our Accountants to discuss your particular needs. Accountants 2 Business Ph (07) 3823 2344
