Tax-deductible travel expenses require substantiation if you want to claim a tax deduction. The documentation needed depends on the type and duration of the business or work-related trip.
Here are some of the most critical considerations:
Principal Reason – Business vs Private Travel
Business or work-related expenses can be deductible when travelling on behalf of a company or organization for work related purposes.
Deductions allowable for specific types of travel
If the trip’s primary purpose is for business or work, the costs can be fully deductible.
If a trip incurs only incidental business or work activities, an apportioned between the private portion of the trip and accompanying relatives is required as this portion is not deductible.
Deductions allowed.
Travel expenses that are tax deductible if the other conditions are met include:
- Airfares
- Hotels/Motels (accommodation)
- Food and Drinks
- Taxis or trains (Travel)
- Car hire
The following travel-related expenses cannot be claimed as deductions:
- Visas
- Passports
- Travel Insurance
Documentation Requirements
Certain circumstances require that you keep written evidence (receipts) to claim the allowable deductions mentioned above. The required evidence may differ depending on whether you receive a travel allowance and how many deductions you claim.
Each year the ATO sets a reasonable travel allowance that covers accommodation, meals and incidentals incurred while travelling for work purposes.
There are set limits for a reasonable amount of travel allowance to cover accommodation, food and drinks and other incidentals incurred while travelling for business. These are set out by the ATO and updated yearly.
- No receipts are required if deductions are below the ATO reasonable travel amount for that year and the travel is domestic, and you received a travel allowance, however under new rules, you are required to show that you did spend the travel allowance on work travel expenses. Entries on your credit card are usually sufficient. If your expenditure exceeds the ATO reasonable travel amount, written evidence is required for all incurred expenses.
- Written evidence is required for all expenses relating to domestic travel where you have not received a travel allowance.
- For overseas travel, written evidence is required for accommodation costs. However, no written evidence is required for meals and incidentals if the incurred expenses are below the ATO reasonable travel amount, and a travel allowance has been received. But again you will need to show that you did spend the allowance.
- Written evidence is required for all expenses for overseas travel where you have not received a travel allowance.
Travel Diaries also need to be kept and maintained in some circumstances, including when you are travelling for six or more consecutive nights, regardless the travel destination.
What should be included in your travel diary?
Your travel diary should contain details of all business activities that are performed while travelling, including:
- What the activity is
- The date, time commenced and how long the activity took place.
- Where the activity was held
These are the basic requirements for travel business travel claims. Please get in touch with our office if you have any questions at [email protected]
