So, you have a work-related trip coming soon, and you wonder how much of your travel expenses can you claim. If you are a small business owner or an independent worker who manages their taxes without an accountant, you might find the answers you need in this article. Here is what you need to know.
Defining a Work-Related Travel Expense
“Work-related travel expenses” refers to the соmеrсiаl travel expenses incurred by a taxpayer that is related to carrying out their job. It can be within or outside Australia.
Allowed Work-Related Travel Tax Claims
The ATO allows taxpayers to claim tax deductions for the following expenses:
- Transport costs (such as cost of fuel, ferry, train or taxi fares)
- Travel allowance paid to you by your employer or client (if applicable)
- Traveller’s cheques and foreign exchange fees
- Motor vehicle expenses (such as fuel, registration and loan interest costs)
- Telephone and internet charges
- Accommodation and meals
- Other expenses (as approved by the ATO)
You can refer to the ATO website for a comprehensive list of allowed work-related travel expenses.
What You Cannot Claim
Travel expenses cannot be claimed if they are not directly related to employment.
For example, you cannot claim travel expenses as a deduction if:
- Your employer or client covers the full cost of the work-related travel expenses; or
- Your employer or client reimburses you for work-related travel expenses after the expenses incurred.
Here are some examples for your reference:
Some common expenses that cannot be claimed include:
- Non-work-related telephone calls
- Expenses for travel within your workplace
- Meals and accommodation paid for by your employer or clients
- Travel insurance
- The cost of your flights, unless it is part of an allowance paid to you by your employer
- Travel to and from the airport
What If Your Employer Gave You Allowance?
If your employer or client gave you a travel allowance, you could claim tax deductions for the work-related travel expenses you incurred.
For example, you were required to travel from Sydney to Melbourne for work reasons, and your employer gave you an allowance of $400. That means you can claim $400 as a deduction.
The expenses claimed as a tax deduction must not exceed the allowance received. However, if you received less budget, you are required by the ATO to report the amount of expenses claimed as a tax deduction.
What If Your Employer Did Not Give You Allowance?
The ATO allows you to claim tax deductions for the work-related travel expenses you incurred, based on a reasonable amount.
You can claim a deduction based on a reasonable amount, provided the work-related travel expenses you incurred are supported by evidence such as:
- Diary entries
How to Keep a Travel Diary
What you should do before you start claiming for your work-related travel expenses is to keep a travel diary and record all the details of your travel, including the following deductible expenses: accommodation, meals, car expenses etc.,
It would be best if you keep a travel diary detailing:
- The reason for the trip
- Where you travelled to and from
- The duration of the trip
- The date and place of the trip
- The name and address of the organisation, person, or property visited
- The number of kilometres travelled or the amount of petrol used
- The total amount of travel expense you incurred
- The amount of your travel allowance you received
- Other benefits you received from your employer or client (if any)
- Any other relevant information
This travel diary will help substantiate your work-related travel expense claims during the tax return filing.
If you are a small business owner or an independent worker managing your taxes, it would be in your best interest to claim as many tax deductions as possible. Should you need to go out to travel for work, keep in mind that you need to have a travel diary to record all details of your work-related travel expenses. More importantly, keep all your receipts.
Let experts deal with your tax preparation, audits, financial preparation, and more while you focus on your work. SMB Accounting has been the trusted accountant on the Sunshine Coast since 1993. Call us at 1300 854 159 to learn how we can serve you.