Does your job ever require you to stay away from home overnight? If your answer is “yes”, the good news is that you may be able to claim tax deductions for certain travel costs. Accommodation expenses, meals, and other incidental costs can potentially be tax-deductible when travelling for work.
What’s the catch? As with most things tax-related, there are quite a few rules surrounding what you can and can’t claim. For starters, 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?
Examples of Work-related Travel Expenses
In the following circumstances, you can generally claim relevant expenses incurred during the trip:
- Your regular workplace does not change, but your job necessitates multi-day trips like visiting clients in another city
- You are required to take short work trips, and you stay in temporary lodging such as a hotel rather than commuting back daily
- 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?
If a trip qualifies, the Australian Taxation Office (ATO) allows you to claim reasonable deductions for accommodation, meals, and transportation.
Accommodation expenses
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 travelling on a business trip.
It’s possible to claim expenses for housing you rent or own when travelling away from work temporarily. However, 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. Maintaining a home separate from your workplace is a personal decision, and the tax rules are intended to reimburse travel costs rather than support a residential choice.
Incidental travel expenses
Minor incidental costs related to your trip like parking, public transportation, or internet charges at your lodging can qualify as tax deductions. These might also include laundry expenses, phone calls for business purposes, and even minor tolls. Remember, these expenses should directly relate to your work trip and be supported by receipts for maximum claim potential.
Claimable transportation costs
Transportation costs to and from your destination are also claimable tax deductions. Things like plane, train, or bus tickets all count. If you drove your own vehicle, you might be able to claim a deduction for fuel, car maintenance, and registration costs. Just be sure to keep your receipts to back up your claims.
Worried your record-keeping isn’t up to scratch? Use our free downloadable tax checklist to ensure you always have the precise records you need.
READ: 2023 Tax Time Deductions To Reduce Your Tax Bill
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Non-Deductible Travel Expenses
There are a few situations where out-of-pocket costs incurred while travelling for work do not qualify as deductions. For example, if your employer provides accommodation or meals during your trips, you cannot claim those expenses 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. Similarly, the ATO sees choosing to sleep near the office rather than returning home between shifts 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 won’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
- The freedom to have family or friends visit you where you’re residing
When to Claim a Travel Expense on Your Tax Return
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 travelling would normally qualify for a deduction.
Relocation costs for a new job do not qualify.
Pro Tax Tip: If you travel away from home for six 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.
Keeping a 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 the ATO’s record keeping exemption or are an airline travel crew member, you won’t need to keep a travel diary.
You can keep an electronic or paper diary. Either way, you’ll need to include details of:
- Your location
- What you were doing
- The dates of your trip
- The start and end times of your work-related activities
How to Calculate Travel Expenses
Have you travelled for both work and personal reasons? This does make the situation a little trickier, but if you meet the criteria, you can still claim your work-related travel expenses. What you’ll need to do is properly allocate expenses between the two. Only work-related costs are tax-deductible, so accurately apportioning is vital.
For example, if you add 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 travelling overnight for work. You need to determine the work-specific expenses and only claim those amounts.
Even if you’re 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. In these murky cases, it’s always best to consult with a professional tax accountant who can help you accurately apportion the costs. This is the best way to maximise your tax refund while staying in the ATO’s good books.
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.
READ: Travel for work? Here Are Some Expenses You Can Claim.
The Three Golden Rules for Claiming Tax Deductions for Travel Expenses
The Australian Taxation Office (ATO) has three main ‘golden rules’ for claiming work-related expenses:
- You must have spent the money yourself and received no reimbursement (this ensures expenses aren’t claimed multiple times)
- The expense must directly relate to earning your income (i.e. there must be a clear connection between the expense and your job)
- You must have a record to prove it (receipts and invoices substantiate your claims, and the ATO may request them for audit purposes)
Keeping these three rules in mind will help ensure any work-related expenses you claim are legitimate and compliant with ATO guidelines. The onus is on you, the taxpayer, to show that your expenses satisfy all criteria. Following the golden rules is the best way to minimise your risk of having deductions disallowed. In turn, this can save you from having 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 maximise any deductions you’re entitled to claim.