Article by National Tax & Accountants Association Ltd.
An employee construction project manager/supervisor was denied deductions for overtime meal expenses, as he was not paid an overtime meal allowance under an industrial agreement (award).
Facts
It was accepted that the taxpayer worked during the day on building sites, did additional paperwork at night and often worked weekends during the relevant income years.
As a result, additional amounts were negotiated and ‘rolled’ into his salary to cover the fact that he was expected to work additional hours, and also to cover any out-of-pocket expenses associated with such overtime.
However, the taxpayer’s salary was not paid under an award, which was imply used as a starting point in annual remuneration negotiations.
The taxpayer claimed a deduction for overtime meal allowances, contending that he had received an allowance under the relevant industry award to buy food and drink whilst working overtime.
Under audit, the ATO disallowed these overtime meal claims, and imposed a 25% administrative penalty on the tax shortfall for lack of reasonable care.
Decision
The AAT agreed with the ATO, finding the taxpayer had received no overtime meal allowance under the relevant industrial award.
This was on the basis that the taxpayer was paid the same amount each week, regardless of any overtime he actually worked, meaning the payment was not a ‘definite predetermined amount’ to cover an estimated expense (as an allowance should be).
Additionally, the overtime amounts were ‘rolled in’ to the calculation of the taxpayers fixed weekly wage.
As a result, the calculation of the ‘allowance’ out of the taxpayer’s gross salary was merely a construction, and not representative of a separately identifiable allowance for his overtime meal expenses.
As no deduction is claimable under the income tax law for overtime meal expenses unless an appropriate award overtime meal allowance is paid, the Tribunal swiftly dismissed the taxpayer’s appeal, and also affirmed the 25% administrative penalty.
Ref: Kael v FCT [2017] AATA 38
Plant and associates
www.plantandassociates.com.au
07 55965758