The ATO has released its updated reasonable travel and overtime meal allowance rates for the 2026–27 income year in Taxation Determination TD 2026/4.
The overtime meal allowance has increased to $40.00, while the reasonable amounts for domestic and overseas travel have also been updated based on salary levels and travel destinations.
Although these rates are published each year, they are often misunderstood. In particular, receiving a travel allowance does not automatically entitle an employee to claim the ATO’s published rate as a tax deduction.
A travel allowance is the starting point
The ATO’s reasonable amounts are relevant where an employee receives a genuine travel or overtime meal allowance from their employer.
Generally, the allowance should:
- be paid specifically to cover work-related travel or overtime meal expenses;
- relate to particular work trips or overtime worked, rather than being a general additional payment;
- be shown separately from normal salary or wages; and
- be intended to help cover expenses the employee is expected to incur.
If an amount is simply included in an employee’s normal salary package or is not identified as a separate allowance, the ATO’s reasonable rates generally do not apply. Normal substantiation rules will usually apply to any deduction claimed.
The reasonable rates are not an automatic deduction
Employees can generally only claim expenses they actually incur for deductible work-related travel or overtime meals.
The ATO’s reasonable amounts simply provide a benchmark that, in certain circumstances, may allow employees to claim without keeping receipts for every individual expense.
The expenses must still:
- have actually been incurred; and
- relate to work-related activities.
Employees should not treat the published rates as a standard or automatic deduction.
Good records are still important
Even where a genuine travel allowance has been paid, employees should keep sufficient records to demonstrate that they incurred the expenses and that their claim is reasonable.
Useful records may include:
- a diary recording work trips and overnight travel;
- details of meals and incidental expenses incurred while travelling;
- bank or credit card statements showing the expenses were personally paid;
- a representative sample of receipts; and
- where travel involves six or more consecutive nights away from home, a travel diary recording the dates, locations and purpose of the travel.
While receipts may not always be required, relying solely on the ATO’s published rates without supporting evidence could lead to unnecessary scrutiny if a tax return is reviewed.
Practical tips for employees and employers
If you or your employees receive travel or overtime meal allowances, it is worth reviewing the arrangements to ensure they meet the ATO’s requirements.
Consider the following:
- Check payslips: Ensure allowances are separately identified rather than included in ordinary salary or wages.
- Keep records: Maintain a simple travel diary and retain supporting documents throughout the year.
- Claim actual expenses: The ATO’s reasonable amounts are not a target deduction. They are a benchmark that may allow the normal receipt requirements to be relaxed in certain circumstances.
- Take extra care on longer trips: If you are away from home for six or more consecutive nights, additional travel diary requirements will generally apply.
A little preparation can avoid problems later
The updated reasonable amounts provide a useful guide for employers and employees during the 2026–27 income year, but they should not be viewed as an automatic entitlement to a tax deduction.
Understanding the rules, keeping appropriate records and claiming only genuine work-related expenses can help reduce the risk of problems if the ATO reviews your tax return.
If you have questions, please do not hesitate to contact our office to speak to one of our team.
