Have you ever wondered if you can claim tax deductions for your travel expenses for a recent conference or seminar you attended?
What about the cost of meals you consumed, flights you took and places you stayed at while you were attending this conference?
In this article we discuss the types of tax deductions you can declare when you fill out your tax return, both as an employee and as a sole trader.
Cost of meals, flights and accommodation
If you are travelling, you may be able to deduct the costs of meals, flights and accommodation if the following conditions apply:
- You declare any travel allowance you receive from your employer as income in your tax return
- You did not incur the expenses because of a choice you had made to maintain residence in a different location to that of your place of employment
- You are working away from home for a short period. You are not living away from home
- As part as your employment duties there is a requirement to travel away from home
- You maintain a permanent home at a location away from the work location that you are travelling to, and
- You have paid for travelling costs and have not been reimbursed for them.
Meal expenses are generally deductible if you have incurred the expense as a result of attending conferences or seminars which are considered to be outside of your immediate living area or where there is a requirement to sleep away from home.
Typical travel expenses include airfares, accommodation, transportation and some incidental costs.
Travel allowances
Each year there is an ATO tax ruling which sets out the maximum daily amount an employee in receipt of a bona fide travel allowance can claim without substantiation. However, if you do not receive a travel allowance then you cannot use the daily rates.
Should you wish to claim more than the maximum daily amount as defined in the ATO tax ruling, you will need to ensure you have kept tax invoices to substantiate the entire claim.
What if I mix a business conference and a private holiday?
Have you ever attended a business conference for a few days, then decided to stay a bit longer and have a holiday? Did your partner or spouse accompany you on this trip? Additional rules may apply to limit or increase the amount of tax deduction you may be able to claim.
Trips partly for business and partly for private purposes
Depending on what the main purpose of your trip was, the transport costs may be entirely deductible.
If the main purpose was to gain or produce assessable income (e.g. to attend a work-related conference), then generally the entirety of your own transport expenses incurred in connection with travelling to the venue will be deductible. This includes airfares and other incidental travel costs such as taxis and public transport.
For example, if you were attending a three day work-related conference in London, but decided to spend two days afterwards sightseeing, the airfares would usually be entirely deductible where the main purpose of the trip was to attend the conference. However, some of the accommodation and meal costs may be non-deductible to the extent they were in relation to private purposes.
So, if the travel is for both work and private purposes, you would need to apportion your travel expenses.
Accompanying persons
Travel expenses incurred in relation to your partner or spouse are generally not deductible, however special rules may apply depending on your individual circumstances.
If you have been accompanied by your partner or spouse, the Commissioner has accepted the following methods as ways to identify non-deductible costs:
- 50/50 apportionment, or
- Marginal cost (i.e. the difference in single v double room rates), or
- A mixture of these two approaches.
For example, a full deduction for hotel room accommodation would usually be allowable if your partner stays with you, on the basis that the same cost would have been incurred for the accommodation irrespective of whether your partner joined you or not.
In comparison, your partner’s airfares may not be deductible because they would likely not have been incurred in connection with their derivation of income and they would not have been incurred if you had have gone alone.
Substantiation of overseas and domestic travel
Special substantiation rules apply to both overseas and domestic travel. These types of expenses may not be deductible unless the following conditions have been met:
- Written evidence must be kept by you in relation to the travel expenses irrespective of length of absence from your home. In the instance of a business travel expense this only needs to be kept if the travel was for at least one night away from home, and
- Travel records such as diaries must be kept in the instance where the travel was for six or more consecutive days away from home. Diaries should refer to the nature of the activity, the day and time the activity began, duration of the activity and location of where the activity took place. Tax Invoices, tickets, boarding passes and details of how you worked out any private portion on your expenses should also be included to substantiate your claims. These records must be kept for 5 years.
What if I operate as a sole trader?
As a sole trader you are conducting a business and in order to claim a deduction you must ensure the expense satisfies the rule of being incurred in running your business and not a private expense. If it is a mix of business and private expenses, it should be apportioned and you must have records to substantiate the expense.
If you are registered for Goods and Services Tax (GST), you can only claim the GST exclusive amount as an expense and you are eligible to claim the GST on your business activity statements.
Contact your local William Buck Advisor to learn more about how can maximise your claim and return.
