Travel Expenses
Oh the places you’ll go!
Your job or your business activities might require you to travel nationally or even internationally. These trips come with added expenses, so it is important to understand what records to keep and what you might be entitled to deduct at tax time.
What are travel expenses?
Travel expenses are incurred when you are required to travel to perform your work duties. They can be broken into two components:
- Transport expenses, and;
- Accommodation, meals and incidental expenses.
You can claim travel expenses for local, interstate and international trips (work related trips of course!). Holidays and personal travel expenses are not deductible. That would be way too good to be true.
Transport Expenses
Transport expenses include costs associated with driving your car (for information on car expenses read our blog), catching a plane, train, taxi or bus.
Accommodation, Meals & Incidental Expenses
These expenses can only be claimed if you are required to be away from home overnight for work or business related purposes. If you decide to stay overnight in Sydney for a one-day conference to catch up with an old friend, you cannot claim the cost of your accommodation, meals or any incidental costs. However, if the course is for two days, you will be required to stay overnight and can claim deductions for the above expenses.
Local vs International Travel - GST implications
Local travel expenses (within Australia) will nearly always attract GST, so for those of you who have businesses that are registered for GST, you will be able to claim a GST credit for work related travel expenses. For international travel, most expenses will not attract GST, and you will not be able to claim GST credits. Please keep this in mind when reconciling your books.
Personal apportionment
We’ve all done it, be honest. Your work requires you to head off to a dream location and you decide to tack on a couple of extra days for some R&R. However, if you were planning to do it either on the company’s dime or claim every expense as a tax deduction, think again. If a part of your trip is for personal reasons, you will need to apportion between business (tax deductible) and personal (not tax deductible). As always, there are many interpretations of the rulings, so if you’re unsure, please contact your accountant!
Example: I am a yoga teacher and I fly to Bali to teach yoga. The entire length of my trip is 14 days, but I am only teaching for 7 days.
As 50% of your trip is personal, you need to divide the cost of your accommodation and flights by 50%. For example, if your accommodation and flights came to $2,000 total, you can only claim $1,000 as a tax deduction.
When it comes to incidental expenses, such as food, you can only claim the expenses you incurred on the days you were working. For example, you cannot claim the breakfast you bought on your day off, but you can claim the cost of the breakfast you purchased on the days you are teaching.
Case Studies
Comedian travels to Adelaide, from Melbourne, to perform at the Adelaide Fringe for 2 weeks.
We will assume that you do nothing but work for the two weeks.
The main reason for this trip is for work. As you are required to be away from home for two weeks, you are able to claim both transport expenses (airfare and taxi fares) and accommodation, meals and incidentals as tax deductions.
The ATO requires you to keep a travel diary when you travel for more than 6 nights in a row for work, in addition to keeping all receipts and records. You could just have an additional little spreadsheet for this if you like.
If you see some other comedians’ acts during your stay, to learn how to improve your own act, you may be able to claim the cost of that as professional development. For more information on this, please see our blog on Professional Development/Self Education, and the another on Entertainment.
Hairdresser travels from Adelaide to Sydney for 2 day expo/training event + 2 day holiday
This trip is for both business and personal reasons - 50% of the trip is for work, and 50% pleasure. Assuming you stay in the same accommodation for the four days, you will need to divide the cost of the accommodation and flights by 50%.
Any food and incidental costs incurred during the 2 day expo/training event is 100% tax deductible, however anything purchased during the holiday portion of the trip is personal in nature and therefore not deductible.
As the trip is under 6 consecutive days, you do not have to keep a travel diary, but keep all those receipts!!
Dancer from Adelaide travels to Edinburgh Fest for 4 weeks
In this example we will assume the entire trip is spent working - performing and networking. Never sleeping. We know how it goes.
Transport and accommodation, meals and incidental costs are all tax deductible as the entire trip is for a work purpose.
However, if you spent money on alcohol or any other entertainment as part of your networking, this will not be deductible. Even though you are discussing your business and making connections, the ATO frowns on claiming alcohol as a business expense - this is classified as entertainment and not deductible.
It is also worth noting that as the majority of your expenses will be in the British Pound, it is very important that you keep a very detailed spreadsheet of all your expenses. You will need to note the date of your expense, what the expense was for, and the cost of the expenses in Pounds. Keep a photo of your receipts too - this will help us to convert the expense to AUD when we do your tax returns!
Employee travels from city office to regional office once a week
If you used your own car to travel between the city office to your regional office, you will need to calculate your tax deduction using either the ‘cents per kilometre’, ‘logbook’ or ‘actual costs’ methods. More information on what these methods are and how to calculate your tax deduction, please read our blog on car expenses.
If you are not required to stay overnight you cannot claim the cost of any meals or incidentals purchased.
What do I need to keep?
Receipts, receipts, receipts! We love our receipts, but it is also important to keep a spreadsheet too - this will make tax time easy!
Overseas income
If you are working and earning income overseas, you will still need to report your income in your Australian tax return. Australia has double tax agreements with some countries (basically if you have been taxed by the country you earned the money in you won’t be taxed again by Australia), so keeping records and payment information you received is super important.
Also, if you are planning on earning money while overseas, please make sure you have the correct visa!
Seeing the world is one of the greatest gifts.
You might also like our FREE Bills & Expenses Tracking PDF here.
xxx Lauren
(co-author Caitie Copley)
