06/03/2026
Good news for tax payers ...........The Federal Court of Australia confirmed that a long haul truck driver was entitled to claim meal expense deductions up to the Commissionerâs published reasonable daily allowance amounts without producing Division 900 substantiation.
Justice Colvin held that the Administrative Review Tribunal (ART) made no error of law when it accepted the taxpayerâs evidence as credible and found that he had incurred meal expenses when travelling for work. The case clarifies the relationship between deductibility under section 8-1 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) and the substantiation regime in Division 900.
It is a strong win for taxpayers in terms of full substantiation for deductions not being necessary for deductions that fall within the Commissionerâs guidelines for reasonableness (e.g. TD 2020/5). However, the Court does explain that taxpayers do need to validate that they have incurred expenses in deriving their income. In practical terms this means:
Failure to comply with ATO requests for taxpayers to provide all receipts to validate deduction claims that are within its reasonableness guidelines does not necessarily preclude deduction.
However, taxpayers will need to demonstrate they have incurred the expenditure and it was in connection with their work. For example, through bank statements and other corroborating evidence.
Advisers who have previously advised their clients that no substantiation is necessary if deduction claims are limited to the Commissionerâs reasonable amounts need to correct that position with their clients in future and prior tax returns.
Facts
Mr Shaw was a long-haul truck driver. His work routinely required him to travel long distances and spend extended periods away from home, including routes through remote parts of Western Australia and across the Nullarbor.
In his tax return for the 2020â21 income year, Mr Shaw claimed meal expense deductions calculated by reference to the Commissionerâs published reasonable daily allowance for truck drivers in Tax Determination TD 2020/5. That determination sets out what the Commissioner considers are reasonable amounts for travel allowance expenses that may be claimed without detailed substantiation. For the 2020â21 income year, TD 2020/5 specified meal allowance amounts for long distance truck drivers of approximately $26.80 for breakfast, $30.60 for lunch and $52.75 for dinner.
Mr Shaw limited his claim to the Commissionerâs published reasonable amount on the advice of his tax agent, who advised that if the claim did not exceed the reasonable allowance amount, detailed substantiation such as receipts would not be required.
Following an audit, the Commissioner disallowed the claim in full on the basis that the taxpayer had not substantiated the expenses. On objection, the Commissioner effectively accepted an average of $19 per day, based on the amounts he considered could be identified in the taxpayerâs bank records.
Mr Shaw sought review in the ART. The Tribunal accepted his evidence that he routinely purchased meals at roadhouses and service stations, supplemented by groceries purchased before and during trips, and that he frequently used cash in remote locations where electronic payment facilities were limited.
The ART ultimately concluded that the taxpayer had incurred the claimed expenditure and that the substantiation exception in section 900-50 applied because the claim did not exceed the Commissionerâs reasonable amounts.
Federal Court decision
The Commissioner appealed to the Federal Court on seven grounds, challenging the ARTâs reasoning on issues including apportionment, burden of proof and the operation of the substantiation provisions in Division 900.
Justice Colvin dismissed the appeal, holding that the Tribunal had made no error of law.
The Court emphasised that the ARTâs conclusion rested on its factual finding that Mr Shawâs evidence was credible and established that the claimed meal expenses were incurred while travelling for work. As the appeal was confined to questions of law, the Court could not revisit those factual findings.
Justice Colvin also emphasised that although the Commissioner publishes âreasonable amountsâ for travel allowance claims, this guidance does not operate to create automatic deductions. Taxpayers must still demonstrate that expenses were incurred in gaining income.
The Court confirmed three core principles:
1. Deductibility requires proof that the expense was incurred, even where the amount claimed is no more than the Commissionerâs âreasonable amountsâ;
2. Division 900 substantiation rules do not apply where a taxpayer satisfies the travel allowance exception in section 90050;
3. A taxpayerâs credible testimony, supported by general financial records and a consistent pattern of travel, may be sufficient to establish incurrence of meal expenses.
The Court also clarified that section 900200 may apply even where a taxpayer has acted on incorrect advice from a tax agent, provided that advice gave rise to a genuine and objectively reasonable expectation that Division 900 substantiation was unnecessary.
In Mr Shawâs case, the ART was entitled to rely on his evidence about long haul travel routines, food purchasing patterns, use of cash and grocery transfers, and the practical realities of purchasing food while travelling in remote areas.
Key Principles from the decision
1. Credible taxpayer testimony can be enough to prove expenses were incurred
The Court upheld the ARTsâ finding that Mr Shawâs sworn, credible evidence about his travel routine and meal spending habits was sufficient to show the expenses were incurred, even without receipts.
The ART was not required to undertake precise apportionment or item level analysis of grocery transactions.
2. âReasonable amountsâ in the Commissionerâs Determination do not create automatic deductions
The Commissionerâs published reasonable amounts operate only as substantiation thresholds. They do not affect the test for deductibility.
Taxpayers must still prove they actually incurred the relevant expenses.
3. Division 900 substantiation rules and section 90050 exception operate separately from section 81
The Court emphasised the legislative structure:
Section 8-1 determines whether an expense is deductible.
Division 900 governs how certain deductions must be substantiated.
Even where the section 900-50 exception applies (because the claim is within the Commissionerâs published reasonable amount), the taxpayer must establish that:
the expense was incurred, and
it was incurred in gaining or producing assessable income
4. The ART did not apply a reasonableness test under section 81
The Commissioner argued that the ART had effectively applied a general reasonableness standard. The Court rejected that submission.
The Court confirmed that deductibility depends on incurrence, not what seems âreasonableâ. The concept of reasonableness is relevant only to the substantiation exception under section 90050.
6. Tax agent advice can support a âreasonable expectationâ for section 900200
The Court accepted that incorrect advice from a tax agent may still give rise to a reasonable expectation for the purposes of section 900-200, depending on the circumstances.
However, that provision only relieves taxpayers from Division 900 substantiation requirements. It does not remove the need to prove deductibility under section 8-1.
7. The Commissioner cannot require Division 900level recordkeeping when an exception applies
Where a taxpayer is entitled to the substantiation exception (e.g., claims no more than the published âreasonable amountâ), the ATO must not insist on receipts or detailed logs.
Closing comments
The decision confirms that workers who receive travel allowances â particularly those in industries such as transport, construction, mining, and remote services â may rely on the Commissionerâs âreasonable amountsâ for substantiation relief, provided they can still demonstrate that the expense was actually incurred.
Importantly, the judgment signals that the Commissioner cannot require Division900level receipts where an exception applies, nor insist on granular apportionment methodologies inconsistent with the policy purpose of the travel allowance substantiation regime.
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