Long gone are the days when your office was the only place where you conducted business. In this day and age, more and more people are obligated to travel both interstate and overseas as part of their job.
Work-related trips may be short when meeting a client in a neighbouring city, but they may be prolonged when attending a conference in another state. No matter the length of your journey, you are likely to make some expenses. So, where does the Australian Taxation Office (ATO) stand on costs you incur while traveling for work?
Keep reading to find out!
Work-Related Trips - ATO General Rules and Regulations
When it comes to tax liability, the ATO considers your travel to and from work a private expense and as such, you can’t claim a deduction on the cost. However, using a car you own or lease for work outside of regular commute to work results in additional costs that you can deduct from your taxes in certain instances, as discussed below.
Unfortunately, the ATO won’t accept tax deduction even if you incurred the costs as a result of:
- Working overtime
- Spending extra gas money
- Doing work-related chores (for example, picking up a colleague or mail on your way to work)
- Having no public transportation
As far as car expenses go, you can claim a tax deduction on costs as a result of using your car for work when:
- Visiting multiple worksites a day
- Traveling from one workplace to another (if you have a second job and you don’t go home between jobs)
- Attending a work-related conference or course
- Going to meetings with existing and potential clients, suppliers, or prospects
To be tax-deductible, you must handle all expenses on your own, out of your pocket.If you were reimbursed for any of the costs by your company, bear in mind that you won’t be able to claim a deduction.
Much more than car expenses, the ATO has set rules and regulations regarding all types of work-related travel costs, as well as terms and conditions you must fulfill to claim them. These are the ones you must be aware of!
Business Travel Expenses You Can (Not) Claim for Deduction
The ATO allows you to claim a tax deduction for all work-related expenses other than commuting to your workplace, such as:
- Accommodation costs
- Food and beverages while travelling for work outside of your usual workplace
- Parking costs
- Tolls - Public transportation (planes, trains, bussess, taxis, etc.)
- Car hire (only short-term)
- Motorcycle expenses
Remember to keep all receipts and tax invoices if you are to deduct these costs.In case you’re travelling away from home for more than six consecutive nights, you are required to keep a travel diary, documenting the:
- Reason for traveling
- Places you visited
- Duration of all the activities you were a part of when travelling
You can declare tax deductions if:
- The travel allowance you received from your employer (if any) is claimed as income in your tax return
- You are not moving permanently to the travel destination, rather you must work away from home for a (relatively) short period
- The trip was not by your own choice but rather a job requirement
- You incurred meal expenses as a result of fulfilling job obligations outside of your living area
- You handled all travelling costs and you haven’t been reimbursed for them
Which Costs Are Unclaimable?
You can’t claim any costs related to unlawful behavior, including fines for speeding or parking infringement.
Additionally, you can’t claim travel expenses if:
Your employer provides accommodation
- Your employer provides meals
- You receive reimbursement for any work
-related travel costs
Once a year, the ATO puts forward a tax ruling that sets the grounds for reasonable amounts you can spend on travel expenses, be it meal, accommodation, transportation, or any other incidentals that may be incurred while on overnight trips.
If you don’t exceed the maximum daily amount you can claim without substantiation, you don’t have to keep detailed records of your spendings while travelling. If you spend more than the limit set by ATO, you have to provide evidence for your travel expenses.
Keep in mind that you can’t claim the reasonable amounts specified by the ATO if you haven’t actually spent the money. You can claim only the amount that you spend!
Should You Mix Business and Pleasure?
If you wish to combine your business trip with a private family holiday, remember that you can’t claim all costs as business-related expenses in your tax return form.
The ATO is fully aware that many people try to claim the entire travel experience as a business cost even if employees spend half of the time on vacation. Although there are some loopholes, don’t try to trick the ATO - they don’t let anything slide by.
For more information regarding tax implications when travelling, visit us at CapTaxation. Our advisors will be happy to assist you with any inquiries, questions, or information!