The main areas for travel expenses that can be claimed as tax deductions are:
- meals; and
Specifically, these can include:
- public transport costs, including taxi and air travel fares;
- bridge and road tolls, parking fees and short-term car hire costs;
- meals and accommodation expenses while staying overnight for work;
- incidental expenses for purchases that are linked to your work and the purpose of the work trip; and
- petrol, oil and repair costs for a car that is owned or leased by someone else.
However, there are a number of factors to keep in mind when claiming travel-related deductions in your personal income tax return as an individual or as part of small business.
What is “work-related”?
Defining what is work-related is an essential consideration for all travel claims. There must be a direct link between your work and the expense. Put simply, you need to ask: is the travel linked to producing the income on which you pay tax?
Transgressions by politicians aside, recent cases have highlighted the importance of correctly establishing the relationship between your work and the claimed expenses. It’s also important to ensure that your employer will support your claim, should the ATO ask them. In the case of Re Vakiloroaya and FCT  AATA 95, the ATO denied the taxpayer’s claim for $60,000 of work expenses, including travel, and the Administrative Appeals Tribunal agreed, in part because the taxpayer’s travel to visit clients was not required by his employer as a core part of his work.
Thresholds for deductions
To help taxpayers successfully claim reasonable deductions, each year the ATO publishes a Taxation Determination that sets out the amounts considered reasonable to claim for various travel destinations in that income year (for example, see TD 2016/13 for the 2016–2017 income year). This provides a useful baseline for trip budgeting and claiming deductions.
Expenditure versus allowances
Another important question to ask is whether you are paying for work-related travel out of your own pocket – or has your employer paid you a travel allowance?
If you are footing the bill for work-related travel yourself, then the expenses can be claimed as deductions on your tax return. However, if your employer reimburses you for the costs, you cannot also claim them.
A slightly more complex situation comes about if your employer has paid you an allowance. You will most likely have to declare the allowance as income in your tax return, especially if the amount is over the threshold set out as reasonable in the relavent year’s tax determination. Your employer is required to withhold tax on this payment as on your salary. If you are a small business owner who pays an allowance to your employees, your accountant can provide further advice on the finer points of your tax and declaration obligations.
Substantiating your claims
If you are claiming travel expenses, you need to maintain evidence to back your claim. Keeping receipts and information such as a log of car expenses, dates, driving distances and fuel purchases is vital. To show that claimed expenses are work-related, keep a travel diary recording the details of business meetings, including dates, durations, places, times and activities. In addition, sending follow-up email to clients detailing pertinent actions arising out of your meetings offers useful support for your claims.
Distinguishing between business and pleasure
Extending a business trip to include a holiday is a very popular approach, for good reason – it’s an excellent way to get the most out of a trip. However, you need to ensure that you only claim deductions for the work components of your trip. Again, keeping a travel diary will help in keeping your claims organised and reasonable.
Claiming expenses of travelling companions
The interesting case of Re WTPG and FCT  AATA 971 highlighted issues with claiming travel companions’ expenses. If you are considering doing this, it’s worth discussing with your tax adviser when planning your travel. In this particular case, a taxpayer with disabilities was denied a deduction for his wife’s travel costs when she accompanied him to conferences overseas. The taxpayer’s wife had accompanied him on the trip as a carer, as his employer did not provide one. The ATO ruled that his wife’s travel expenses were not related to income-producing activities and so could not be claimed as deductions, and the Administrative Appeals Tribunal agreed with that ruling.