Travel Expenses

Travel expenses whether domestic or overseas are allowable provided they are paid (incurred) in producing assessable income (often your salary and wages).   The words ‘in producing’ mean literally expenses incurred in earning income (again generally your salary or wages), and NOT prior to earning income, consequently expanding the business structure is  non deductible,  whereas seeking new marketing trends and manufacturing processes ie keeping abreast or ahead is deductible.

Work related travel – It is a question of fact as to whether an employees’ travel will be deductible, however the draft ruling specifies that regard should be given to the following:

  • whether the work activities require the employee to undertake the travel;
  • whether the employee is paid, directly or indirectly, to undertake the travel;
  • whether the employee is subject to the direction and control of their employer for the period for
  • the travel; and
  •  whether the above factors have been contrived to give a private journey the appearance of work travel.

Rental Property Travel – Travel and car expenses: rent collection, inspection of property, maintenance of property are generally now NOT allowed as of 1 July 2017, exceptions apply such as a Corporate body holding property assets or carrying on a business of property management.

Extended travel – generally overnight,  consideration of whether apportionment of expenses or consideration of Fringe Benefits Tax applies in cases where the travel includes a spouse or is partly for pleasure needs to be taken into account.

Overseas travel expenses – matters to consider

  • What was the purpose of the trip overseas?
  • Details of your current employment duties and how the travel relates to your employment.
  • If you have already undertaken your travel, provide a copy of your travel diary.
  • Did your employer request that you travel overseas?
    • Did you receive a travel allowance from anyone or were you reimbursed for any of the expenses incurred? If so, how much did you receive?
  • Did you take any leave to travel overseas? If yes, what type of leave did you take?
  • What date did you leave Australia and what date did you return?
  • Did the trip contain a private component? If yes, provide details.
  • How did you apportion expenses to cover the private component?
  • Did anyone accompany you on the trip overseas? If yes:
    • Who and what was your relationship with them?
    • What did they do while you were doing work-related activities?
    • Have you claimed, or do you intend to claim, any expenses for this person?
  • What expenses did you incur or will you incur on the trip overseas? Include amounts, dates and details on how you calculated these (if required).

We recommend you have a record of diary events to establish purpose of travel is incurred in respect to your employment or business trip, documentary evidence confirming appointments meetings prior to travel is recommended together with receipts to substantiate expenses (a summary diary of expenses) together with calculations supporting any apportionment of expenditure for personal/business use. ATO and case law provides guidance and a starting point is TR 98/9, also see bottom of this page for latest ruling.

For Businesses travel paid for by the employer, the private portion is a Expense Payment Fringe Benefit, read below to find out more and the direct link to the ATO webpage.

TRAVEL DIARY

A ‘travel diary’ is a diary or similar document that must be obtained from the employee where:

  • the employee’s expense is incurred for travel within Australia for more than five consecutive nights and the travel is not exclusively for performing employment-related duties (the fact that the business travel requires the employee to stay away over a weekend will not, in itself, mean the trip is not undertaken exclusively in the course of their employment), or
  • the employee’s expense is incurred for travel outside Australia for more than five consecutive nights.
  • In determining whether a travel diary needs to be kept, you need to look at the number of nights the employee is away from home. The number of nights away from home includes transit time.

Example: travel more than five consecutive nights

An employee lives in Brisbane and travels to Hawaii for work purposes. The employee’s flight to Hawaii departs from Sydney. The employee leaves their home in Brisbane on 2 April, flies to Sydney, and departs for Hawaii on 3 April. The employee returns directly to Brisbane on 8 April. The employee is away from their home for six nights in total and would need to keep a travel diary.

A travel diary shows the nature of each work or business activity, where and when it took place, the duration of the activity and the date the entry was made.

See what the ATO has to say on Overseas Travel Expenses <ATO-Link> and  Travel Expenses generally <ATO-Link>.

FRINGE BENENFTS TAX

If the provision of the expense payment or residual benefit is covered by an annual ‘no private use declaration’ (refer to <section 20.3 of Fringe benefits tax exempt benefits>), the requirement to obtain a travel diary will be waived. That is, if the expense payment benefit is subject to a consistently enforced prohibition on private use and which would result in a taxable value of nil, you will then be able to make an annual no private use declaration.

Such a declaration would state that the benefits were provided only for employment related purposes and that there was no private portion.

EMPLOYEE DECLARATION

  1. You must obtain an employee declaration except where:
  2. the employee’s expense (other than an expense incurred in respect of a car they own or lease) is incurred exclusively in the course of performing employment-related duties (for example, protective clothing or tools of trade)
  3. there is a requirement to keep a travel diary
  4. the requirement to keep a travel diary is waived because the employee is a member of an international aircrew
  5. the provision of the fringe benefit is covered by a recurring fringe benefit declaration.

For more info see the ato website (Businesses > Tax topics – Fringe   benefits tax > Advanced topics > Guide for employers and latest ruling in 2017/d6.