There is often some confusion about what can and can’t be claimed regarding travel expenses. This article provides a rundown.
A legitimate tax deduction can be claimed for travel by individual employees or business taxpayers, provided the expense is incurred in earning assessable income, and properly substantiated. Travel expenses include transport, accommodation, food, drink and incidentals.
Employees
For an employee, travel expenses are part of work-related expenses. If the total work-related expenses claim for the year is $300 or less, there is no requirement to obtain written evidence or keep any travel records. If the total claim exceeds $300, all expenses must be substantiated, by written evidence and a travel diary for a trip exceeding six nights. Travel incurred in seeking new employment is not deductible.
For employees who receive a travel allowance, the ATO issues a Taxation Determination each year that sets out “reasonable” amounts that may be claimed. The reasonable amount varies with the employee’s salary and the destination. For travel less than six nights in a row where the claim is “reasonable”, there is no requirement to substantiate expenses except for overseas accommodation. For travel six or more nights in a row, a travel diary is required. Where the claim exceeds the reasonable amount, written evidence is required, as well as a travel diary for travel six or more consecutive nights.
For a business travel claim (a travel expense incurred in producing income other than salary and wages) written evidence must be kept if the travel involves at least one night away from home, and a travel diary must be kept if away for six or more consecutive nights. Travel aimed at securing new agencies or expanding the business structure is not deductible.
Investors
For a property investor travel involved in collecting rent, maintenance and repair of the property, preparing or surrendering a lease, or evicting a tenant is deductible, but not travel for the purpose of acquiring a new property. There is no automatic deduction: the expense must be actually incurred and apportioned between investment and private purposes. Written evidence must be obtained, and a travel diary if away for six consecutive nights, or, if the travel is part private, to assess deductible percentage.
For an investor, travel to consult investment advisors or attend company meetings in connection with managing an investment portfolio is deductible. Written evidence is required, and a travel diary if six or more consecutive nights, or to assess private portion.
In all cases where the taxpayer is accompanied by another person, the cost must be correctly apportioned.
Written evidence consists of receipts, invoices or credit card statements. Minor expenses of less than $10 each and less than $200 in total may be recorded by the taxpayer in a document such as a diary. Both records must contain date, supplier’s name, amount and nature of the expense. If the taxpayer can show it would be unreasonable to obtain written evidence, then a diary entry would be acceptable.
A travel diary must contain particulars of each business activity undertaken during travel, setting out the nature of the activity, date and time it began, how long it lasted and where the activity took place.
All records must be retained for 5 years after the date of lodgement of the tax return.
