Reference is made to Circular 96-33 in which you were advised that an exemption had been sought on the provisions of Taxation Ruling, TR No 96-21 dealing with the taxation of meal and travelling allowances.

As you may recall TR 96-21 sets Australian Public Service allowances as the reasonable limits for taxation purposes for the 1996/97 financial year. Taxation Ruling, TR 97-14 continues this approach for 1997/98. Where NSW public sector allowances exceed those payable in the Australian Public Service the full allowance is to be included in the employee's group certificate. The employee would need to show expenses incurred for which the allowance was paid in their tax return.

An extension of time in which to implement the requirements of the Taxation Ruling was sought from the Australian Taxation Office. This agency is also currently seeking an exemption from its effect.

In the interim the Australian Taxation Office has:

• acknowledged the costs and administrative difficulties being experienced by the NSW public sector in implementing the PAYE requirements;
• on that basis agreed to extend the period granted for implementation of Taxation Rulings No 96-21 and 97-14 to 30 June 1998;
• recognised the correlation of the PAYE procedures of employers and the substantiation requirements of employees in respect of travel allowances and award overtime meal allowances. Accordingly for the 1997/1998 income year, claims by NSW public sector employees for expenses incurred up to the amount of travel and overtime meal allowances received, will not need to be supported with written evidence; and
• advised that this extension does not apply to part day travel allowances.

A part day travel allowance (PDTA) is an allowance paid where a sleep away from home is not involved. A PDTA includes meal allowances paid to employees under the Crown Employees (Travelling Compensation) Award whilst travelling away from home that does not involve an overnight stay.

Meal expenses incurred when travelling that do not involve an overnight stay are not allowable tax deduction and all employers have an obligation to implement the correct PAYE arrangements for part day travel allowance payments. This decision should have been implemented by 1 October 1996.

Enquiries can be directed to Margaret Baker on telephone number (02) 9228 3580 or Doug Cowell on (02) 9228 3575.

C. Gellatly
Director General