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Claiming Overtime Meal Allowance

You don’t sometimes have the luxury of rushing home for a quick dinner when your job requires overtime, and it will only need you to pay cash out of your pocket to eat at a restaurant when you ordinarily wouldn’t. Many employers provide overtime meal allowances to help with your costs when you have to dine out because of overtime labour.

While an overtime meal allowance is accessible to all employees, they are most frequently used by factory, transportation, and construction workers who work more than a set amount of overtime – typically two hours – and are paid by an industry award.

Here’s an overview of how overtime meal allowances work and what it is for employees who regularly work overtime.

Understanding Overtime Meal Allowance

In general, meals and drinks bought at work are considered personal expenses and are not tax deductible for the employee. The exception is where the employer provides the employee who is compelled to work overtime with an overtime meal allowance according to an industrial award.

To understand it better, we summarise it for you wherein an overtime meal allowance is:

• An amount of money given to you by your company so you can purchase food and drink (a meal allowance)
• A bonus intended only for working overtime
• A payment you get through a labour agreement – like an award or enterprise bargaining agreement
• An expected reimbursement to cover the expense of the meals and beverages you eat while working extra.

Note that an overtime meal allowance made about an industrial instrument but not enforceable under it is not paid under that industrial instrument.

It is also not an overtime meal allowance if the cost of your meals while overtime is included in your regular income and wages.

Claiming Overtime Meal Allowance

An overtime meal allowance should be listed separately and, in addition, to your gross wages on your annual payment summary.

When itemised in this way, it should be reported as income on your tax return, but if you have worked overtime, you may be entitled to claim it as a tax deduction if the criteria are met.

If you work overtime, you may be able to deduct your costs for meals – including food and drink – in the following situations:

• When you put in extra hours and spend money on your lunch.
• You were given a lunch allowance for working overtime by an industrial award.

You do not need to report it as income on your tax return if you received an overtime meal allowance that is not listed on your payment summary provided that:

• You used all of your budgets for tax-deductible expenses;
• Or you don’t list the costs as an expense on your tax return.

The claims far greater than the reasonable amount must be thoroughly supported by written evidence.

Reasonable Overtime Meal Allowance

It is not regarded as an overtime meal allowance if you were paid for meals during overtime as an undetermined portion of your regular income or compensation. If that is the case, it generally wouldn’t be itemised on your payment summary and wouldn’t require a separate tax return declaration.

Take not, as well, that every financial year, ATO updates the “Reasonable Overtime Meal Allowance Amount”.

You may deduct the price of a meal you purchased during your overtime in the following cases:

• In accordance with a labour agreement or an enterprise contract, you receive an overtime meal allowance.
• On your income statement and in your tax return, you disclose the overtime meal allowance.

Write Off Overtime Meal Allowance

Taxpayers can write off the cost of overtime meals in two ways:

• Substantiated – The actual cost of the overtime meal that is substantiated; however, it must be accompanied by proof of the expense, such as a receipt.
• Unsubstantiated – If you receive an overtime meal allowance paid under an industrial award, exceptional substantiation standards apply to your overtime meal expenses. For costs spent, a deduction is permitted without supporting documentation as long as the claim doesn’t exceed what the ATO considers “reasonable” spending.

General Rules for Overtime Meal Allowance

Employees must ensure they are provided under an award to avoid having their meal allowance incorporated into a workplace agreement or EBA.

In reality, some businesses’ payroll systems incorporate the meal allowance in the “Gross Payments” rather than showing it separately on their certificates. In these situations, assuming the budget is given by an award, we urge the client to either check their pay stubs for information or seek a letter from their employers attesting to the payment of an allowance and the daily rate.

Alternatively, if an overtime meal allowance is noted separately on your payslip, that will suffice as proof that you received one, provided it is paid under an industrial award. In this situation, you should preserve copies of your pay stubs if the ATO conducts a review.

When are overtime meal allowances deductible?

While not all businesses do so, most governmental organisations, including state governments and public colleges, do. Private companies may also provide overtime meal reimbursements, which you can consult in your employee handbook for more information. Read your policy carefully, as public and private organisations frequently have significantly different ones.

If you are required to work a set amount of overtime, say three hours, and that time extends past your daily home mealtime, you may be eligible for an extra meal payment.

After your overtime work, your company might pay you the whole amount of your allowance, but in other situations, they might pay you what you can show you spent. You must save your receipt and submit it for reimbursement up to the permitted amount.

Meals purchased while working are often considered private expenses and are not tax deductible. However, if any of the following apply, you may deduct for an overtime meal:

• You have purchased and consumed dinner while working overtime
• You received a lunch payment for overtime work under a collective bargaining or enterprise agreement where both:
  • It appears on your income statement because of your employer.
  • You include it in your tax return as income.

An expense you incur to generate your employment revenue is a meal you purchase and consume while working overtime.

If an exception from keeping records of overtime meal expenses applies, you must have a paper to substantiate you incurred the charge. For instance, if your claim falls within the Commissioner’s published range of acceptable sums.

When are overtime meal allowances non-deductible?

When you travel for work, you frequently eat away from home even if you aren’t working. The criteria for food reimbursement for travel, mainly overnight trips, are typically unique and aren’t regarded as overtime. Additionally, you won’t be eligible for an overtime meal allowance if your employer pays for your lunch while you are working overtime, such as if they make you attend a company banquet on a weeknight. You can only use the allowance if you buy food with your own money.

If any of the following apply, you cannot:

• Purchase the overtime lunch on your own — for instance, your employer might offer one or compensate you for the cost.
• If you are working overtime, consume the meal (such as eating the food on your way home after working overtime).

What are the exceptions for keeping overtime meal allowance records?

You often require records if you want to deduct the costs of an overtime meal allowance. If your expenses are within the acceptable range the Commissioner discloses, there might be an exception.

To rely on the exemption from recording overtime meal allowance, you must do the following:

• You must pay a deductible dinner charge for working overtime.
• Your employer is required to provide you with an overtime meal reimbursement.
• The total amount you deduct for expenses paid for by your allowance is within the range of what the Commissioner considers reasonable.

Expenditure Reports for Overtime Meal Allowance

Unless an exception applies, you must document your overtime meal costs in writing. Then, you must keep written documentation for at least five years after the filing date of your return.

Written Proof

A paper, digital, or electronic document you receive from the provider of the goods or services, like an itemised receipt, is known as written evidence. Written documentation must include all that follows:

• the supplier’s name or company name
• the cost expressed in the currency used to make the purchase
• what the goods or services are like
• the day you first incur the cost
• the day the record (evidence) was created.

The paperwork must be in English; however, if the expense is incurred outside of Australia, it may be in the native tongue of that nation.

You can use the following to demonstrate when you made payment if the paperwork does not indicate the day you incurred the travel expense:

• an account statement
• statement for a credit card
• other logical, independent proof that demonstrates when it was paid

You may add the missing information yourself if the document the supplier provided you with needs a description of the nature of the products or services. You must complete this step before filing the income tax return in which you are claiming the deduction, though.

Learn How to Claim Your Overtime Meal Allowance with Kasker Associates

The rate of the overtime meal allowance depends on numerous industry awards – which you can check with your employer for your award rate. The allowance must be reported as assessable income on your tax return and is typically stated separately in the “allowances” section on your Annual Payment Summary.

Here at Kasker Associates, we will help you understand how an overtime meal allowance works and how beneficial it is for you who work overtime. We will also talk you through its processes for claiming the reimbursement you deserve.

Understanding Low-Value Pooling

Depending on the asset’s value at acquisition, some assets may qualify for either an instant write-off or the low-value pool.

For example, property owners should be aware of various strategies that can boost their deductions sooner when it comes to depreciating eligible plant and equipment assets. As a result, they will have more cash on hand each year and will be able to reap the rewards of their investment property sooner.

Claiming an immediate write-off or putting low-value or low-cost assets in a low-value pool are two of the easiest ways to accomplish this. For instance, the owner will be able to deduct the entire cost of an asset in the first year if its value is $300 or less.

What is Low-value Pool?

Various firms in the country have been compiling tax depreciation reports using one of the depreciating strategies known as low-value pooling. In order to be precise, they use the clause from Subdivision 40-E of the Income Tax Act of 1997.

Low-value pooling legislation enables owners to combine depreciable assets that meet certain criteria into a single pool that will decline faster. The Australian Taxation Office or ATO typically sets a predetermined rate for depreciation, which varies depending on the asset, for each asset. No matter how long a property has been owned and rented, investors in real estate who choose to purchase low-cost assets and put them in the low-value pool can claim them at a rate of 18.75 percent in the year of acquisition. The remaining balance of the item may be claimed starting in the second year at a rate of 37.5% per year.

Low-value pooling is a technique used to maximise deductions by depreciating plant components at a higher rate. To boost the owner’s cash return, the following asset categories can be put into a low-value pool: Low-Cost and Low-Value assets

What makes the low-value pool’s Low-Cost and Low-Value assets different from each other?

LOW-COST ASSETS

Low-cost assets are those that are purchased for less than $1,000 in total.

A low-cost asset depreciates at an annual rate of 18.75% on a decreasing value basis. Only the first year is this rate in effect; it rises to 37.5% starting with the second year. Because it is an average divided over the number of days held during the first year, the rate is lower in the first year.

Please be aware that the pool always depreciates according to decreasing value. When you choose to transfer an asset to the low-value pool, it remains there.

The decision to add low-cost assets to a low-value pool is up to the taxpayer. However, if they decide to do so in a given income year (tax year), then all future low-cost assets acquired from that point on must likewise be added to the low-value pool.

In actuality, choosing to employ a low-value pool for your low-cost assets won’t always be in your best interests. Depreciating the assets outside of the pool, for instance, may be beneficial if a renovation is scheduled for two years from now because the assets inside the pool cannot be written off upon demolition or destruction.

Depreciable assets with opening values of less than $1,000 in the year of acquisition are referred to as low-cost assets. For example, cooktops, range hoods, exhaust fans, and curtains may fall under this category.

LOW-VALUE ASSETS

You may also include low pool value assets at the start of a tax year if their opening adjustable values (written down values) are less than $1,000 when the depreciation method you are using is decreasing value.

We refer to these as low-value assets. The asset may be placed in the low-value pool starting that year, at which point it will begin to depreciate at a rate of 37.5% on a declining value basis.

A taxpayer can decide whether or not to add low pool value assets to the low-value pool on an asset-by-asset basis. It makes no difference when the asset was first purchased.

A depreciable asset with a written-down value of less than $1,000 is also referred to as a low-value asset. In other words, the asset’s worth in the year of acquisition exceeds $1,000. The residual value, after depreciation from prior years, is, nevertheless, less than $1,000. Items that fit this description are put in a low-value pool that is itemised. An illustration could be a $1,100 hot water system that was purchased. The asset would qualify for inclusion in the low-value pool after depreciating to a written-down value of less than $1,000 in the second financial year of ownership.

Calculating the Depreciation

You apply an annual rate of 37.5% to the depreciation of all the low pool value assets.

In the first year after purchasing an asset and allocating it to the pool, its deduction is calculated at a rate of 18.75% (i.e., half the pool rate). No matter when you decide to add the asset to the pool during the year, the rate remains the same.

Starting a low-value Pool

When you initially decide to select to allocate a low-cost or low-value item to it, you begin a low-value pool.

When you decide to establish a low-value pool and assign a low-cost asset to it, you must pool all further low-cost assets you begin to acquire during that tax year and any subsequent tax years. You can choose whether to add low-value assets to the pool on an asset-by-asset basis, meaning assets that have been written down to a value of less than $1,000. An asset that has been added to the pool must stay there after that.

We’ll help you understand how these works and which asset categories suits you the best. Start your low-value pooling journey with Kasker Associates today!

Loss carry back provides a refundable tax offset that eligible corporate entities can claim:

• after the end of their 2020–21 and 2021–22 income years
• in their 2020–21 and 2021–22 company tax returns.

Eligible entities get the offset by choosing to carry back losses to earlier years in which there were income tax liabilities. The offset effectively represents the tax the eligible entity would save if it was able to deduct the loss in the earlier year using the loss year tax rate. As it is a refundable tax offset, it may result in a cash refund, a reduced tax liability or a reduction of a debt owing to the ATO.

The eligible entity does not need to amend the earlier income years to claim the offset.

If an entity does not choose to carry back a loss, the loss may be carried forward to use in a later income year.

The law has recently been amended to allow a loss carry back choice to be changed. An entity wanting to change a loss carry back choice must notify us using an approved form. Further information about the approved form and how to change a choice will be available soon.

Loss carry back is intended to interact with temporary full expensing, encouraging new investment which may result in tax losses. Where the choice to carry back tax losses results in a tax refund, this will increase business cash flow.

In this section

• Eligibility for the tax offset

Instant write-offs:

As part of the Federal Government’s Coronavirus Stimulus Package, the Instant Asset Write-Off threshold increased is $150,000 (net of GST) per asset acquired. This change applies to businesses with an aggregated annual turnover of less than $500 million, where those assets are first used or installed ready for use before 30 June 2023.

Car Limits:

From 1 July 2022 the following car threshold amounts apply for the 2022–23 financial year.

Income tax:

• The car limit for 2022–23 is $64,741.
• This is the maximum value that can be used for calculating depreciation on the business use of a car first used, or leased, in the 2022–23 income year.

Goods and services tax (GST):

• If you purchase a car and the price is more than the car limit, the maximum GST credit you can claim (except in certain circumstances) is one-eleventh of the car limit, which is $5,885 in 2022–23.
• You can’t claim a GST credit for any luxury car tax you pay when you purchase a luxury car, regardless of how much you use the car in carrying on your business.

Luxury car tax (LCT):

• $84,916 for fuel-efficient vehicles in line with an increase to the motor-vehicle purchase sub-group of the Consumer Price Index (CPI).
• $71,849 for all other luxury vehicles, in line with an increase in the “All Groups” CPI.
• Remember, the LCT value of a car generally includes the value of any parts, accessories or attachments supplied or imported at the same time as the car.

For business turnovers between $75K and $50M

To here to apply online:

https://www.service.nsw.gov.au/transaction/jobsaver-payment

On 26 June 2021, the Public Health (COVID-19 Temporary Movement and Gathering Restrictions) Order 2021 (the Public Health Order) was issued. This and other subsequent orders have restricted freedom of movement, gatherings and the ability of certain businesses to operate in New South Wales.

Eligible businesses and not-for-profit organisations will receive fortnightly payments backdated to the start of the fortnight they first experienced the required decline in turnover on or after the commencement of JobSaver on 18 July 2021.

Eligible businesses and not-for-profit organisations with employees will receive the equivalent to 40% of weekly Payroll for work performed in New South Wales provided:

• the minimum payment will be $1,500 per week, and
• the maximum payment will be $100,000 per week.

Eligible businesses and not-for-profit organisations that do not have any employees will receive $1,000 per week.

Larger businesses in the hospitality, tourism and recreation industries with a turnover more than $250 million and up to $1 billion may be eligible for a larger weekly payment under the extension to the JobSaver scheme. More details are provided in Attachment D.

Weekly Payroll should generally be determined by referring to the calculations underlying the most recent Business Activity Statement (BAS) provided to the Australian Taxation Office (ATO) prior to 26 June 2021 for the 2020–21 financial year. Item W1 in the BAS includes amounts of wages, salaries and other payments that are subject to PAYG withholding tax.

Payments subject to withholding tax in W1 includes allowances, leave loading, director fees and termination payments but does not include payments such as superannuation contributions, amounts subject to salary sacrifice, interest or dividends. For the purposes of calculating weekly Payroll, businesses should deduct amounts from W1 that have been withheld on behalf of contractors under voluntary agreements.

1.  Eligibility criteria

3.1 Businesses and not-for-profit organisations impacted by the Public Health Order will be eligible if:

• they have an Australian Business Number (ABN) and were operating in New South Wales on 1 June 2021;
• they had an aggregated annual turnover of between $75,000 and $250 million (inclusive) for the year ended 30 June 2020;
• they experienced a decline in turnover of 30% or more due to the Public Health Order over a minimum 2-week period commencing 26 June, compared to:
• the same period in 2019, or
• the same period in 2020, or
• the 2 weeks immediately prior to any restrictions, 12-25 June 2021 (inclusive)
• for employing businesses, they maintain their employee headcount from 13 July 2021 if they receive payments from the commencement of JobSaver, or otherwise from the day immediately prior to the fortnight they first experienced the required decline in turnover while they continue to receive JobSaver payments; businesses that do not maintain the declared headcount must notify Service NSW.

Certain entities, such as those primarily earning passive income (rents, interest, or dividends), government agencies, local governments, banks and universities are not eligible for JobSaver.

Businesses in the hospitality, tourism and recreation industries with an aggregated annual turnover of more than $250 million and up to $1 billion may be eligible for support under the extension to the JobSaver scheme.

Where the annual turnover of non-employing businesses is aggregated with employing business(es) for the purpose of calculating aggregated annual turnover, the non-employing businesses are ineligible to apply.

For non-employing businesses, the business receiving payments must be the primary income source for the associated person. Individuals with more than one non-employing business may only claim payment for one business.

Employees can receive Commonwealth COVID-19 Disaster Payments if their employer is receiving JobSaver.

Non-employing businesses are not eligible for the JobSaver payment if individuals associated with and deriving income from the business have received a Commonwealth COVID-19 Disaster Payment for the same period.

2.  How funding may be used

The JobSaver payment will help eligible businesses to cover their business costs incurred due to the impacts of the Public Health Order in New South Wales. These costs may include, but are not limited to, the following expenses:

• salaries and wages;
• utilities and rent;
• financial, legal or other advice;
• marketing and communications;
• perishable goods; or
• other business costs.

While JobSaver payments can be used to cover general business costs, the primary objective of this payment is to help businesses to survive, maintain relationships with their employees and be in a position to trade when restrictions are lifted.

3.  Application process

Applications will open on 26 July 2021 and close after 11:59pm on 18 October 2021.

Businesses that have applied and are eligible for the 2021 COVID-19 Business Grant may be automatically eligible for JobSaver but must provide further information on employee headcount and payroll. These businesses may be contacted by Service NSW if further information is required.

Payments will be made in arrears. Businesses applying for JobSaver will need to nominate the 2-week period in which they first experienced the required decline in turnover on or after the commencement of JobSaver on 18 July 2021. Once approved, payments will begin from that nominated fortnight.

Supporting evidence

Where evidence is required to show a decline in turnover, this will be in the form of a letter from one of the following:

• qualified accountant as defined in the Corporations Act 2001;
• registered tax agent as defined under the Tax Agent Services Act 2009; or
• registered BAS agent as defined under the Tax Agent Services Act 2009.

A template is available on the Service NSW website setting out what the accountant or tax professional’s letter must include. If an applicant is not able to provide a letter from an accredited accountant or tax professional to verify their decline in turnover, they should contact Service NSW on 13 77 88.

Alternative circumstances

Businesses operating in New South Wales with their ABN registered business address outside New South Wales will be able to apply if they can provide evidence their business was operating in New South Wales on 1 June 2021. Evidence to demonstrate this includes commercial rates notices or lease agreements. Where a rates notice or lease agreement is not available, Service NSW may accept a combination of the following:

• utility bills
• insurance papers
• supply invoices
• registration papers
• contractor licences.

There are several circumstances where a business may not meet the eligibility criteria and supporting evidence requirements, but still may be eligible for JobSaver. These circumstances include:

• Businesses not operating for the full year to 30 June 2020 (e.g. new businesses).
• Businesses affected by drought, bushfires or other natural disasters.
• Business acquisition, disposal, or business restructure that has impacted the business’ turnover.
• A sole trader or small partnership impacted by sickness, injury or leave.
• Businesses that are a group employing entity with the principal function of supplying employee labour to other members of a Group.

Alternative rules for these businesses: refer to Service NSW Jobsaver guideline..

Where a business operates through a trust structure, the applicant will be required to provide additional information to demonstrate an aggregated annual turnover of between $75,000 and $250million (inclusive) is derived through the trust. The entity operating the business is eligible for JobSaver, not other entities that are receiving passive income from the business.

Service NSW can request a combination of the following documents to support its determination of eligibility:

• accountant’s letter
• prior Business Activity Statements
• income tax declarations
• audited profit and loss statements
• receipts and invoices from purchases.
• NSW payroll tax reconciliation returns

Where a business is unable to provide these documents, or where Service NSW is satisfied it has other suitable methods to determine eligibility, Service NSW may accept other forms of documentation.

6.12 Businesses requiring assistance with their online application can contact Service NSW on 13 77 88. 

For more information about Covid-19 NSW JobSaver:

https://www.service.nsw.gov.au/jobsaver-payment-guidelines