Did you know that you may be able to claim tax expenses for certain travel costs if your job requires you to stay away from home overnight? The good news is that accommodation expenses, meals, and other incidental costs can potentially be tax deductible when traveling for work.
However, your trip must require an overnight stay away from your regular residence. Commuting costs or daily trips where you return home each night do not qualify.
So when can you consider travel away from home for tax purposes? Here are a few examples:
- If your regular workplace does not change, but your job necessitates multi-day trips like visiting clients in another city.
- During short work trips, as long as you stay in temporary lodging such as a hotel rather than commuting back daily.
- If you cannot reasonably have family or friends visit you during work travel.
On the other hand, expenses are generally not deductible if:
- Your home is already a long commute from your regular workplace.
- You choose to live in a location solely for personal reasons and commute long-term.
- You elect to sleep near your workplace rather than returning home each night.
What travel expenses can I claim on tax?
Some expenses the Australian Taxation Office (ATO) allows as travel tax deductions include accommodation, meals, and transportation. For accommodation, you can claim things like hotel rooms, apartments, or even campground fees if you’re staying overnight somewhere for work. You’re also able to claim any food or drinks you purchase while traveling on a business trip.
Minor incidental costs related to your trip like parking, public transportation, or internet charges at your lodging can qualify. Transportation costs to and from your destination are also claimable tax deductions. Things like plane, train, or bus tickets all count. Just be sure to keep your receipts to back up your claims.
It’s possible to claim expenses for housing you rent or own when traveling away from work temporarily. This only applies if the accommodation costs are reasonable compared to commercial lodging for the trip duration. Expenses must also be divided proportionately if the property is used both personally and professionally. Unfortunately, choosing to live farther from your job does not make housing an allowable work expense. While maintaining a home separate from your workplace is a personal decision, the tax rules are intended to reimburse travel costs rather than support a residential choice.
What travel expenses can’t I claim on tax?
There are a few situations where out-of-pocket costs incurred while traveling for work may not be eligible deductions. For example, if your employer provides accommodation or meals during your trips, those expenses would not be claimable since you did not pay for them yourself.
Additionally, if the company or a third party reimburses you for any travel costs after the fact, those amounts have already been covered.
Living far from your workplace or job site is considered a personal circumstance rather than a business expense. Choosing to sleep near the office rather than returning home between shifts is seen as a personal decision rather than a business necessity.
If you’ve moved to a new city or area for an extended period to be closer to your workplace, you likely wouldn’t be able to claim costs like meals, housing, or other daily costs. Some signs that suggest you’re truly living somewhere rather than just temporarily working there include a long-term change in where your job is located, staying in a more permanent housing situation like an apartment, and having the ability to have family or friends visit you where you’re residing.
When to claim or not to claim on tax
If your job requires you to travel overnight away from your home, those costs could potentially be deductible. For example, let’s say your work involves meeting with clients in another state, requiring an overnight stay. In that situation, expenses like airfare, lodging, and meals while you’re traveling would normally qualify for a deduction.
Relocation costs for a new job also do not qualify.
Pro Tax Tip: If you travel away from home for 6 or more nights in a row, you need to keep travel records such as a travel diary. This is in addition to keeping receipts for your expenses.
Travel diary for tax purposes
You’ll need to keep a travel diary to show your workings of private versus business activities. If you travel within Australia and meet eligibility requirements for record keeping exemption or are an airline travel crew you won’t need to keep a travel diary.
You can keep an electronic or paper diary, but either way, you’ll need to include details on your location, what you were doing, the date and start and end times of your activities.
Apportion expenses when you claim your expenses
When traveling for both work and personal reasons, it’s important to properly allocate expenses between the two. Only work-related costs are tax deductible, so accurately apportioning is necessary.
For example, if you add a holiday time to the end of a business trip, only the costs for the business portion can be claimed. The same applies if family or friends join you while traveling overnight for work – you need to determine the work-specific expenses.
Even if attending a work event while on a personal holiday, apportionment is required. However, if the private aspect is incidental to an overnight work trip, full costs may still be deductible.
The key is properly separating expenses incurred for work versus personal purposes. Taking care with documentation and record keeping helps ensure deductible amounts are correctly identified if ever reviewed.
Three golden rules for claiming tax deductions
The Australian Taxation Office (ATO) has three main ‘golden rules’ for claiming work-related expenses:
- You must have spent the money yourself and weren’t reimbursed. This ensures expenses aren’t claimed multiple times.
- The expense must directly relate to earning your income. There must be a clear connection between the expense and your job.
- You must have a record to prove it. You need documentation like receipts or invoices to substantiate any claims made if the ATO requests them for audit purposes.
Keeping these three rules in mind will help ensure any work-related expense claims are legitimate and compliant with ATO guidelines. The onus is on the taxpayer to show the expense satisfies all criteria. Following the golden rules minimizes the risk of having deductions disallowed or penalties applied during an ATO review. Every person’s tax and work situation is different, so it’s always smart to check with an accountant if you have any questions about eligibility. The rules can seem tricky but understanding your own circumstances will help you maximize any deductions you’re entitled to.