Travel expenses

Travel expenses area tax auditor’s delight.  So what do you need to do?  The basics are:-

• One must keep written or scanned evidence of all expenses when away from home for more than one night.
• If one is travelling overseas or away for more than six nights within Australia, then a travel diary must be keep. Note the word must; it is not an optional requirement.  No diary, no claim.
• Travel diaries can be bought at most newsagents. The simplest things to say is fill in each column to each row, but it is worth noting that one must record:-  – the nature of the activity.  – the day and time that the business activity commenced.  – how long the business activity lasted.  – the name of the place where you engaged in the business activity.
• Collect as many business cards and brochures as you can. Photos are also great proof of what you did.

What if the trip is partly private and how might costs be split?  These are my views as the ATO provides surprising little clarity on this matter:-

• If one goes for a conference to say Europe, then such a long haul means that it is unreasonable to expect one to fly in the day before and then spend say four days sitting in a darkened room. Arriving say two days early does not in my view change the purpose of the trip.  Consequently, the cost of the whole flight remains fully deductible.
• In my view, if one stays on for a day and/or it coincides with a weekend, the trip remains fully deductible.
• The costs incurred on the work/conference days are deductible such as accommodation and food (but not excessive alcohol).
• Sight seeing trips are not deductible.
• What if one attends a week long conference but enjoys a week’s holiday beforehand or afterwards? Clearly the holiday is not deductible.  However, it also raises a question as to whether the whole air fare can be claimed.  Unless there is some compelling counter argument, the air fare would need to be apportioned on a proportional days basis.
• What if one’s partner comes along to the conference or business trip. One method is to only claim half of the accommodation costs.  Another method which I subscribe to is to find out the single rate and claim that – as that is what would have been incurred but not for the partner.  In some cases, it is the same rate.  Make sure you keep the evidence of the alternative room rate.

A common problem is obtaining receipts in some countries.  Thankfully, the ATO provides relief to this problem by allowing employers to pay their employees (which can includes the directors of a company) a daily travel allowance.  The ATO annually sets out daily rates that employers can pay employees to cover their daily travel costs of food, travel and other incidental expenses.  There are rates for Australia (which include accommodation) and overseas (which do not include accommodation costs as they must be fully substantiated).  Please ask us if you would like a copy of the current year rates.  There are differing rates for different areas with higher rates applying to higher costs centres and levels of salary.  Moreover, an employee is exempt from substantiation if they do not claim more than the allowance paid to them.

As it is an allowance, it must be treated as such in your payroll system, be reported within W1 on the next BAS and shown as an allowance on the end of year PAYG Payment Summary.  Please ask us if you would like help in setting this up correctly.

Please remember that as it is an allowance, this method can’t be used by those running a business in their own name or by partners in a partnership.

AT MRS, we will spend today planning for your success tomorrow.

At MRS, we will spend today planning for your success.