When you’re travelling for business in Australia, it’s important to understand which expenses you can claim as tax deductions. The Australian Taxation Office (ATO) has specific guidelines for what you can claim, but it’s easy to get confused by the details. In this post, we’ll break down the types of business travel expenses that are generally deductible and how to keep accurate records to ensure you’re fully compliant with Australian tax laws.
What Expenses Can You Claim for Business Travel?
As a business owner, you must be aware of potential tax deductions that you can claim for expenses if you or your employee is travelling for business purposes. You are only allowed to claim a deduction for expenses related to business travel, whether you travel within a day, overnight, or for many nights. Here’s the list of expenses that you are allowed to claim:
- airfares
- tram, train, taxi, bus, or ride-sourcing fares
- car hire fees and the costs you incur when using a hire car for business purposes
- accommodation
- meals, if you are away overnight.
To claim expenses for overnight travel, you need to have a permanent home elsewhere, and your business needs you to stay away from home overnight. If you are liable for goods and services tax (GST) input tax credits, you need to claim your deduction in your income tax return at the GST-exclusive amount.
Expenses You Are Not Allowed to Claim
You can only claim the travel expenses incurred for business purposes. You need to exclude any private expenses, such as:
- a holiday or visit to friends or family that is combined with business travel
- the expenses related to you or your employee taking a family member on the trip
- souvenirs and gifts
- entertainment and sightseeing
- passports, visas, or travel insurance
- travel expenses because you are living away from home or relocating
- travel undertaken before you started running your business.
You can look for ‘small business accountant near me’ online to find a professional to handle everything on your behalf. They can help you claim potential tax deductions you are eligible for.
What are Travel Diaries Used for?
A travel diary is mandatory for partners in a partnership and sole traders to record overnight business travel expenses.
- Sole traders and partners in a partnership
If you are a partner in a partnership or a sole trader, and you travel for 6 or more nights, you need to keep a travel diary before ending the travel journey. In this travel diary, make sure to record the details of each business activity, including:
- What the activity was
- The approximate time and the date when the business activity started
- How long the business activity lasted
- The name of the place where the business activity happened.
Your travel diary must contain sufficient details to support your claim and can be in any format.
Companies and trusts
Make sure to use a travel diary if you are a company or a trust, as it will help you record the portion of the travel that was related to personal purposes.
What Types of Records Do You Need to Keep for Business Travel Expenses?
You need to keep records of your business travel expenses for at least 5 years, including:
- tax invoices
- boarding passes
- tickets
- travel diaries
- details of how you worked out the private portion of expenses.
To meet your record-keeping requirements, you can seek help from bookkeeper services Melbourne.
Conclusion
If you are a business owner, you must be aware of potential tax deductions for business travel expenses. However, you also need to know what deductions you can’t claim. Many business owners find it difficult to keep track of possible tax deductions, and often skip those deductions. That’s why it’s recommended to consider seeking help from Reliable Melbourne Accountants.
Additionally, if you are interested in getting information on the franking deficit tax, you can read our previous blog.