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ATO Rulings For Chefs & Catering Staff
 

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Income tax: hospitality industry employees

- allowances, reimbursements and work-related deductions This Ruling, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953, is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Ruling is a public ruling and how it is binding on the Commissioner.

What this Ruling is about Class of person/arrangement 1. This Ruling applies to employees in the hospitality industry (hospitality employees). For the purposes of this Ruling hospitality employees are chefs (and other cooks), waiters and bartenders. Every reference in this Ruling to the term 'waiter' should be read to cover men and women. 2. This Ruling deals with: (a) the assessability of allowances and reimbursements received by hospitality employees; and (b) deductions for work-related expenses generally claimed by hospitality employees. 3. The Ruling discusses the assessability of allowances and reimbursements under section 25 and paragraphs 26(e) and 26(eaa) of the Income Tax Assessment Act 1936 (the Act)and whether deductions are allowable or are specifically excluded (or limited) under subsections 51(1), 51(4) or 51(6), or sections 51AGA, 51AH, 51AL, 53, 54, 55, 61 or 82A of the Act. 8. Each year the Australian Taxation Office (ATO) carries out audits of taxpayers' returns. This Ruling will be used by the ATO when it undertakes audits of the returns of hospitality industry employees. Where there is a tax shortfall, any penalties imposed will be in terms of Taxation Ruling TR 94/3 on the basis that the views of the ATO on the correct operation of the law have been expressed in a public ruling. Date of effect 9. This Ruling applies to years commencing both before and after its date of issue. The Ruling does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Ruling (see paragraphs 21 and 22 of Taxation Ruling TR 92/20). 10. If a taxpayer has a more favourable private ruling (whether legally or administratively binding), this Ruling applies to that taxpayer to the extent of the inconsistency only from and including the 1995-1996 year of income.
Typical Chefs & Catering Staff Allowances
 

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The following allowances commonly received by Chefs & catering Staff are paid to recognise that expenses
may be incurred by Chefs & catering staff in doing their jobs.
These allowances are fully assessable and deductions may be allowable depending on individual circumstances.

Allowance -Possible allowable deduction


Allowances 11. The receipt of an allowance does not automatically entitle hospitality employees to a deduction. The term 'allowance' does not include a reimbursement (see paragraphs 15 to 18).
12. Allowances fall into the following categories: (a) fully assessable to the employee with a possible deduction allowable, depending upon individual circumstances (not normally paid to hospitality industry employees); (b) fully assessable to the employee with no deduction allowable even though an allowance is received (not normally paid to hospitality industry employees); (c) fully assessable to the employee with a deduction allowable for expenses incurred subject to special substantiation rules (paragraphs 13 and 35); (d) not assessable to the employee because the employer may be subject to Fringe Benefits Tax. A deduction is not allowable to the employee for expenses incurred against such an allowance (not normally paid to hospitality industry employees). Reasonable allowance amounts 13. The Commissioner of Taxation publishes annually a Taxation Ruling that indicate amounts considered reasonable in relation to the following expenses: (a)overtime meal expenses; (b)domestic travel expenses; and (c)overseas travel expenses. Allowances received in relation to these expenses are fully assessable. If an allowance is received and the amount of the claim for expenses incurred is no more than the reasonable amount, substantiation is not required. If the deduction claimed is more than the reasonable amount, the whole claim must be substantiated, not just the excess over the reasonable amount.

14. Allowances commonly received by hospitality employees are listed below: Fares Allowance: A deduction is allowable for work related transport expenses incurred in connection with the allowance (paragraph 35 to 40). Overtime Meal Allowance: A deduction is allowable for expenses incurred where an overtime meal allowance is paid under a law or industrial award for the purpose of enabling an employee to buy food and drink at meal or rest breaks while working overtime (paragraphs 121 to 124). Tool Allowance: This allowance is paid to hospitality employees employed on a weekly basis who are required to provide their own tools under an industrial award. A deduction for the depreciation of the cost of tools is allowed immediately if the cost of each tool is $300 or less, or its effective life is less than three years (paragraphs 160)
Reimburesments Chefs & Catering Staff
 

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Reimbursements 15. If a hospitality employee receives a payment from his or her employer for actual expenses incurred, the payment is a reimbursement and the employer may be subject to Fringe Benefits Tax. Generally, if a hospitality employee receives a reimbursement, the amount is not required to be included in his or her assessable income and a deduction is not allowable (see Taxation Ruling TR 92/15). 16. However, if motor vehicle expenses are reimbursed by an employer on a cents per kilometre basis, the amount is included as assessable income of the hospitality employee under paragraph 26(eaa) of the Act. A deduction may be allowable in relation to motor vehicle expenses incurred (see Transport expenses , paragraph 161 to 178). 17. If the reimbursement by an employer is for the cost of a depreciable item (e.g., tools and equipment), a deduction is allowable to the hospitality employee for depreciation (see Taxation Determination TD 93/145 and Depreciation of tools and equipment , paragraphs 88 to 97). 18. If a payment is received for an estimated expense, the amount received by the hospitality employee is considered to be an allowance (not a reimbursement) and is fully assessable to the hospitality employee (see Allowances , paragraphs 11 to 14).
Explanation of Tax Deductions for Chefs & Catering Staff
 

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Deductions 20. A deduction is only allowable if an expense: (a) is actually incurred (see paragraph 24); (b) meets the deductibility tests (see paragraphs 25 to 32); and (c) satisfies the substantiation rules (see paragraphs 33 and 34). 21. If an expense is incurred partly for work purposes and partly for private purposes, only the work-related portion is an allowable deduction. 22. The common work-related expenses incurred by hospitality employees and the extent to which they are allowable deductions are discussed below, in alphabetical order. Bank fees: A deduction is allowable, as a work-related expense, for Financial Institutions Duty that relates to the direct depositing of salary and wages into the hospitality employee's bank account(s). A deduction is not allowable for any other bank fees as a work-related expense (Taxation Ruling IT 2084). Calculators and electronic organisers: A deduction is allowable for the work-related portion of depreciation on the purchase price of these items (see paragraphs 45 to 47). Child care expenses: A deduction is not allowable for child care expenses (see paragraphs 48 to 50). Clothing, uniforms and footwear: A deduction is allowable for the cost of buying, hiring or replacing clothing, uniforms or footwear if these items are: (a) protective; (b) occupation specific; (c) compulsory and meet the requirements of Taxation Ruling IT 2641; (d) non-compulsory and entered on the Register of Approved Occupational Clothing or approved in writing by the ATO before 1 July 1995. These transitional arrangements cease to have effect from 1 July 1995. A deduction will not be allowable for expenditure incurred after 30 June 1995 in relation to clothing approved under the transitional arrangements; or (e) conventional, but satisfy the deductibility tests as explained in Taxation Ruling TR 94/22. Expenditure on clothing, uniforms and footwear must satisfy the deductibility tests in subsection 51(1) of the Act and must not be private or domestic in nature (see paragraphs 51 to 76). Computers and software: A deduction is allowable for depreciation of computers and related software, if purchased together, that are used for work-related purposes. If the software is bought separately from the computer, a deduction is allowable in full in the year of purchase. The deduction must be apportioned between work-related and private use (see paragraphs 79 to 81). Conferences seminars and training courses: A deduction is allowable for the cost of attending conferences, seminars and training courses to maintain or increase hospitality employees' knowledge, ability or skills in the hospitality industry. There must be a relevant nexus with the current work-related activities of hospitality employees (see paragraphs 82 to 87). Depreciation of equipment: A deduction is allowable for depreciation to the extent of the work-related use of the equipment. An item of equipment bought after 1 July 1991 can be depreciated at a rate of 100% if its cost is $300 or less, or its effective life is less than three years (see paragraphs 88 to 97). Driver's licence: A deduction is not allowable for the cost of acquiring or renewing a driver's licence (see paragraphs 98 to 100). Fares: A deduction is allowable for the cost of public transport used for travelling for work related purposes (see paragraph 101). Fines: A deduction is not allowable for fines imposed under any law of the Commonwealth, a State, a Territory or a foreign country, or by a court (see paragraph 102). First aid courses: A deduction is allowable if it is necessary for a hospitality employee, as a designated first aid person, to undertake first aid training to assist in emergency work situations. If the cost of the course is met by the employer, or is reimbursed to the hospitality employee, no deduction is allowable. Gaming licence: A deduction is allowed for costs incurred in renewing a special employee's licence. A deduction is not allowable for the cost of obtaining the initial licence (see paragraph 103). Glasses/contact lenses: A deduction is not allowable for the cost of buying prescription glasses or contact lenses. A deduction is allowable for the cost of safety glasses (see paragraph 104). Grooming: A deduction is not allowable for costs incurred on grooming, including cosmetics and skin care (see paragraphs 105 and 106). Home office expenses: See paragraphs 107 to 114. Private study: A deduction is allowable for the running expenses of a private study to the extent that the private study is used for work-related activities (see paragraphs 110 to 114). Place of business: A deduction is allowable for a portion of running and occupancy expenses if an area of the home has the character of a 'place of business' (see paragraphs 108 and 109). Insurance of tools and equipment: A deduction is allowable for the cost of insurance of tools and equipment to the extent of their work-related use. Laundry and maintenance of clothing, uniforms and footwear: A deduction is allowable for the cost of laundry and maintenance of supplied or purchased clothing, uniforms or footwear if these items are of a kind described under Clothing, uniforms and footwear (see paragraphs 77 and 78). Meals: A deduction is not allowable for the cost of meals eaten during a normal working day (see paragraphs 115 to 120). A deduction may be allowable if meal costs are incurred by a hospitality employee who travels for work-related purposes (see paragraphs 179 to 184). Overtime meal expenses: A deduction is allowable for the cost of meals bought while working overtime if an award overtime meal allowance is received. Special substantiation rules apply (paragraphs 121 to 124). Parking fees and tolls: A deduction is allowable for parking fees (but not fines), bridge and road tolls paid by a hospitality employee while travelling in the course of employment, e.g., between work places (see paragraphs 125 and 126). Professional library: A deduction is allowable for depreciation of a professional library to the extent of its work-related use. The content of the reference books must be directly relevant to the income-earning activities (see paragraphs 127 to 133). Removal and relocation expenses: A deduction is not allowable for costs incurred in taking up a transfer in existing employment or in taking up new employment with a different employer (see paragraphs 134 to 138). Repairs to tools and equipment: A deduction is allowable for the cost of repairs to tools and equipment to the extent that the items are used in work-related activities (see paragraphs 139 and 140). Self education expenses: A deduction is allowable for the cost of self education if there is a direct connection between the self education and the hospitality employees current income-earning activities. Self education costs include fees, travel, books and equipment (see paragraphs 141 to 145). If self education expenses are allowable but also fall within the definition of 'expenses of self education' in section 82A of the Act, the first $250 is not an allowable deduction (see paragraphs 146 to 148). Technical or professional publications: A deduction is allowable for the purchase or subscription cost of journals, periodicals and magazines that have a content specifically related to a hospitality employee's work and are not general in nature (see paragraphs 149 to 151). Telephone, mobile phone, pager, beeper and other telecommunications expenses: A deduction is not allowable where these items are supplied by the employer. If they are not supplied, a deduction is allowable for the rental cost or for depreciation on the purchase price to the extent of the work-related use of the item. Cost of calls: A deduction is allowable for the cost of work-related calls (see paragraphs 152 and 153). Installation or connection costs: A deduction is not allowable for the cost of installing a telephone, mobile phone, pager, beeper or other telecommunication equipment., as it is a capital expense (see paragraphs 154 and 155). Rental costs: A deduction is allowable for a proportion of telephone/equipment rental costs if a hospitality employee can demonstrate that he or she is 'on call', or required to telephone their employer on a regular basis (see paragraphs 154 to 156). Silent telephone numbers: A deduction is not allowable for the cost of obtaining a silent telephone number (see paragraph 159). Tools: A deduction is allowable for depreciation of the cost of tools. Tools bought after 1 July 1991 can be depreciated at a rate of 100% if the cost of a particular item is $300 or less, or its effective life is less than three years (paragraph 91). A deduction is allowable for the cost of repairs to tools to the extent of their work-related use (paragraph 160). Transport expenses: Include public transport fares, and the costs associated with using a motor vehicle, motor cycle, bicycle, etc., for work-related travel. They do not include meals, accommodation and incidental expenses (see Travel expenses at paragraphs 179 to 183). The treatment of motor vehicle and transport expenses incurred by a hospitality employee when travelling is considered below. Travel between home and work: A deduction is not allowable for the cost of travel from home to the normal work place as it is generally considered to be a private expense (see paragraphs 162 to 164). The principle is not altered by the performance of incidental tasks en route. Travel to and from normal work place - transporting bulky equipment: A deduction is allowable if the transport expenses can be attributed to the transportation of bulky equipment rather than to private travel from home to work. A deduction is not allowable if the equipment is transported to and from work by the hospitality employee as a matter of convenience. A deduction is not allowable if a secure area for the storage of equipment is provided at the work place (see paragraphs 165 to 167). Travel between two separate work places if there are two separate employers involved: A deduction is allowable for the cost of travelling directly between two places of employment (see paragraph 168). Travel from the normal work place to an alternative work place while still on duty and back to the normal work place or directly home: A deduction is allowable for the cost of travel from the normal work place to other work places (other than the hospitality employee's home). A deduction is also allowable for the cost of travel from the alternative work place back to the normal work place or directly home. This travel is undertaken in the course of gaining assessable income and the cost is allowable as a deduction (see paragraph 169). Travel from home to an alternative work place for work related purposes and back to the normal work place or directly home: A deduction is allowable for the cost of travel from home to an alternative work place and then onto the normal work place or directly home (see paragraph 170). Travel between two places of employment or between a place of employment and a place of business: A deduction is allowed for the cost of travelling directly between two places of employment or a place of employment and a place of business provided that the person does not live at either of the places and the travel is undertaken for the purpose of engaging in income-earning activities (see paragraphs 171 to 175). Travel to a place of education: The cost of travel between home and the place of education and back home again is deductible. The cost of travel between work and the place of education and back to work again is deductible. If the hospitality employee travels from home to the place of education and then on to work, only the first leg of the trip is deductible. If the hospitality employee travels from work to the place of education and then home, only the first leg of the trip is deductible (see Self education expenses paragraph 143). Depreciation cost limit for motor vehicles: Section 57AF of the Act imposes a limit on the depreciable cost base of motor cars (including station wagons and four-wheel drive vehicles) if the acquisition cost is greater than a specified amount. The depreciable cost base limit applies to both new and second hand vehicles (see Taxation Ruling TR 93/24). Calculation of motor vehicle balancing adjustment: A depreciation balancing adjustment may be necessary on the disposal of a motor vehicle that has been used for work-related activities (see Taxation Ruling IT 2493). Travel expenses: A deduction is allowable for the cost of travel (fares, accommodation, meals and incidentals) incurred by hospitality employees when travelling in the course of employment, e.g. travel interstate (see paragraphs 179 to 183). Special substantiation rules apply. Travel accompanied by a relative: Section 51AG of the Act may affect the deductibility of expenses if relatives accompany a hospitality employee on work-related travel (see paragraph 184). Unions/professional associations fees and levies: A deduction is allowable for annual fees paid to unions and professional associations, although a deduction is not allowable for joining fees. A deduction is not generally allowable for levies (see paragraph 185 to 189).
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