As Covid-19 lockdown restrictions are eased and released, you might find you’re undertaking more travel for your work or for your business. You may receive a travel allowance, are fully-funded, or that you need to pay for your expenses. Any costs you’ve incurred for travel for your work, business or in any way that you earn an income can be claimed as legitimate tax deductions, lowering your overall tax bill.
What Are Travel Expenses?
If you’re out of pocket when you travel for work, common expenses you may claim include:
- Airline, bus, trains, tram, taxi and any ride-sourcing fares
- Car-hire, associated fees, fuel, road tolls, car parking
- Meals if you stay away from home overnight
Pro Tax Tip: If you’ve had to purchase a suitcase, bag or laptop case for your travel, keep those receipts. That expense is a valid claim.
Travel could be your main expense. This includes whether you’ve incurred costs for daily travel, travel taken overnight or many nights, or an overseas trip. Your travel could simply be going from your workplace to a conference or seminar, or travelling to a client’s residence for a meeting. You can even claim the expenses of travelling from one office location to another in the same day.
There are a few instances where you can’t claim travel expenses:
- To claim overnight costs, you must have a permanent residence elsewhere. You can’t claim costs if you’re moving to live in another location
- You can’t claim travel to and from your home to your work place, except under very few circumstances. Check with your tax accountant to see if your circumstances pass the test
- You can’t claim running a personal errand to and from the office
- You can’t claim travel expenses if you’ve worked overtime or out of hours
If you’ve been reimbursed from your employers, or used facilities provided by your employers
What Is Overnight Travel
The Australian Taxation Office (ATO) considers overnight travel when you are away from your home and need to stay overnight at a place that is not normally a residence. The normal place where you work and perform your work duties hasn’t changed location, and you stay for a short term in a hotel or similar.
To claim overnight travel as a business expense, you can’t travel with your family or friends, nor can you claim overnight travel for any personal reason such as wanting to be closer to a workplace or living at another location while you’re working.
The types of overnight travel expenses you may incur and that can be claimed include:
- Accommodation – the cost of staying at a hotel, motel, serviced apartment, caravan or a property booked online such as AirBnB
- Your meals, including food and drink
- Car parking fees, bus tickets, charges for phone and internet
- Transport expenses to and from the location
When it comes to claiming expenses, the more documentation you can provide, the better. Just as you need to keep a log book to claim car expenses, and a work diary to claim home office expenses, you should keep a travel diary to document your travel expenses.
There are a few key points that need to be included:
- A description of your business activity
- The date and time the business activity began and ended
- How long the activity lasted for
- The name of the place in which the business activity was engaged
Pro Tax Tip: If your business activity was a mix of personal and business, you’ll need to apportion and claim only the business costs.
Example of a travel diary
Pro Tax Tip: As a business owner, if you’re entitled to the goods and services (GST) input tax credits, you can claim a tax deduction in your income tax return of the GST exclusive amount.
If you receive a travel allowance, you’ll need to add that to your taxable income. The amount should show up on your income statement when you lodge your tax return. If it doesn’t show up, you’ll need to add it in manually. If you’ve spent the money, you can claim it at tax time.
Pro Tax Tip: You can’t claim the entire allowance as a tax deduction, as it’s added onto your taxable income and is seen as an income stream. You can only claim your allowable expenses.
Proof Of Expenses
As well as a travel diary, the ATO will ask for other forms of proof. This could be in the form of receipts, tax invoices, contracts and other financial reports. You can’t claim it unless you can prove it.
You can keep electronic evidence as long as it’s a clear and true representation of the original. Don’t forget to keep a back up folder in case your electronic files are lost or corrupted.
You can only claim expenses that you’ve already incurred, that you’re personally out-of-pocket for, and that you can prove you’ve incurred the expense. You want to claim all of the travel expenses you can. The difference could mean hundreds if not thousands of dollars in your tax return. Need a little help negotiating your travel expenses? After 50 year helping Australians lodge their tax returns, there’s not a lot ITP Accounting Professionals don’t know about tax. Even better, their fees are fully tax deductible. Phone 1800 367 487 and chat with a friendly professional today.