You can claim tax deductions for business travel expenses. Now, you may be wondering: What expenses can I claim? In this blog, we’ll discuss expenses that you can claim and what expenses cannot be considered business travel expenses.
What Expenses Can You Claim?
As a business owner, you are allowed to claim tax deductions for expenses if you or your employee is travelling for business. Business travel expenses can be claimed by a business, but if they are related to your business, regardless of whether the travel is taken within a day, overnight, or for many nights. Here are some expenses that you can claim:
- airfares
- tram, train, taxi, bus, or ride-sourcing fares
- car hire fees and the expenses you incur (such as tolls, fuel, and car parking) when you use a hire car for business purposes
- accommodation
- meals, if you are away overnight.
To claim business travel 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. If you are looking for ‘tax accountants near me’ to deal with your tax matters, make sure they have experience and knowledge.
Expenses You Can’t Claim
You are allowed to claim the business portion of business travel expenses. You can’t claim any private expenses for business travel expenses. Therefore, you should not include any private expenses, such as:
- a visit to a family or friends, or a holiday combined with business travel
- the expenses related to you or your employee taking a family member on the trip
- gifts and souvenirs
- entertainment and sightseeing
- passports, visas, or travel insurance
- travel expenses that incur because you are living away from home or relocating
- travel undertaken before you started running your business.
To avoid applying for a claim that you are not eligible for, you can seek help from an accounting firm Melbourne
How Can You Claim Employee Travel Expenses?
If your employees travel for your business, the business needs to pay for the travel expenses to claim them as a deduction. The business can pay for the expense by:
- paying directly for the expense from a dedicated business account
- paying a travel allowance to the employee
- reimbursing the employee for their expenses.
Fringe benefits tax (FBT) may apply if your business reimburses or pays for employees’ travel expenses. Certain concessions and exemptions may apply to reduce your FBT liability. For instance, your business may not have an FBT liability if your business reimburses an employee for their travel expenses to attend a work conference, which an employee can claim as an income tax deduction if you hadn’t reimbursed them.
You may be liable for FBT if your employee extends their business travel for private purposes and you reimburse the employee for these private expenses. If your business offers benefits to your employees, you need to keep records that demonstrate how you calculated the taxable value of the benefits and support any FBT exemptions or concessions you used. You may also have to get some records from the employee. You can also rely on your bookkeepers in Melbourne to ensure having the right records.
Travel Diaries
A travel diary is compulsory for partners in a partnership and sole traders to record overnight business travel expenses, and highly suggested for everyone else.
Records for Business Travel Expenses
You need to maintain records for 5 years to substantiate your business travel expenses, including:
- boarding passes
- tax invoices
- tickets
- travel diaries
- details of how you worked out the private portion of expenses.
Conclusion
As a business owner, you must know what business travel expenses you can claim and what expenses you are not allowed to claim. You can also seek help from Reliable Melbourne Accountants to ensure you are claiming the tax deductions you are eligible for.