Work-related travel expenses can be claimed as a tax deduction, which will assist in maximising your tax refund. According to the ATO, work-related travel expenses are any costs incurred because of travel, transportation or accommodation accrued during the course of your job. This does not include travel to and from home to your normal place of employment.
Travel expense deductions can be claimed by a business taxpayer, or an employee on a wage or salary income if a sufficient connection between the expense and income-earning activities can be demonstrated.
Work-related travel expenses may include use of your personal motor vehicle, overnight accommodation and meal charges, flights, other transport costs and ancillary travel expenses
It is important you keep all accommodation and work-related travel expenses records and receipts to substantiate your travel claims, including a travel diary for longer overnight trips.
When Work Related Travel Expenses Are Allowed as Tax Deductions
There are a few simple criteria that determine when you can claim work-related travel expenses as a tax deduction, which are:
- Only claim expenses that are incurred as part of work-related travel. Allow for private and personal components when required.
- The amount you can claim is dependent on whether you receive an allowance for any costs incurred and whether that allowance is included on your PAYG summary.
What You Can Claim as Work Related Travel Expenses
- Meals (if the travel was overnight)
- Travel costs associated with airplane, bus, train and tram tickets, as well as taxi fares
- Vehicle hire (including fuel, insurance, registration, and repairs)
- Travel between two workplaces and costs associated with maintaining and using a car, panel van or utility truck designed to carry one tonne or more, a motor cycle or any other road vehicle designed to carry a load of one tonne or more or nine or more passengers.
What You Cannot Claim as Travel and Accommodation Expenses
- Travel between work and home
- Private purchases made during work related travel, such as purchasing a book, or attending a movie
Domestic and Overseas Travel Expenses
Travel expenses associated with work-related domestic or overseas travel, including car, meals, accommodation, incidentals, etc., will be deductible where the travel constitutes an integral part of the taxpayer’s income-earning activities. The taxpayer must be able to prove a relevant connection between the travel and the derivation of assessable income.
For travel expenses, such as accommodation and food to be deductible, the work-related travel must generally involve an overnight stay for the taxpayer. Essentially, the taxpayer must “sleep away from home” before they are entitled to claim a deduction for costs associated with food and accommodation, whilst a taxpayer is on business travel.
The cost of travelling away from home is deductible:
- For an employee – where they are paid to undertake the travel for an activity which is directly related to their income-earning activities as an employee; and
- For a business person (such as a sole trader) where it is necessarily incurred in carrying on the business to produce assessable income.
Living Away from Home and Travelling for Work
Distinguishing between these two forms of travelling is vital in claiming deductions. The taxpayer must demonstrate that they are on business travel, as opposed to living away from home, as living away from home costs are not usually deductible.
However, where an employer provides accommodation, food and other
incidentals as fringe benefits to such an employee then the employer will generally not be entitled to claim a deduction for those costs as the costs have not been paid by the employee (although Fringe Benefits Tax issues need to be considered).
One or more of the following factors indicate that an employee is may be travelling for work related purposes:
- The employee’s existing work location continues to be their primary place of work
- The employee continues to ‘reside’ near their existing work location (i.e., the employee has maintained their family home when travelling)
- The employee does not take “residential belongings” (e.g., golf clubs, kitchen appliances) with them when travelling
- The employee is not accompanied by family members
- The employee uses temporary style accommodation when travelling (e.g., a hotel or motel)
- The employee is travelling on-work to carry out their normal employment duties and they are not being transferred for a specific assignment
- The duration of the employee’s travel is relatively short-term and the employee’s travel is itinerant in nature
The following factors are indicative of an employee that is living away from home:
- The employee has established a new (but temporary) work location (i.e., a location that is considered the employee’s primary place of employment for a period of time)
- The employee has moved to live close to their new (but temporary) work location
- The employee’s transfer is for a limited or finite period of time (i.e., temporary)
- If it were not for the employee having to move for work purposes, the employee would have continued to live at their original (or usual) place of residence (i.e., their home)
- The employee clearly intends to return home on cessation of work at the temporary location
- The employee is accompanied by family members and the employee uses longer-term accommodation when away from home (e.g., the employee takes out a lease on residential premises).
If an employee has changed their place of residence for a job, any allowance paid by the employer would count as assessable income and no deductions can be claimed on the relocation.
It’s also important that living away from home workers apportion their travel expenses to reflect private and business expenses. Your tax agent will be able to guide you through this process.
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Contact Online Tax Australia for All Your Work Related Travel Expense Claims
If you’ve been searching for an experienced, professionally qualified, transparent accountant that understands all the ins and outs of travel and accommodation expenses, then contact the friendly team at Online Tax Australia today:
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