Many people are required to travel as part of their job. Work-related travel might be something as simple as a short trip to see a client for an hour or two or a prolonged trip lasting several days interstate or even overseas. Some of these travel expenses can be claimed at tax time - but you need to know which rules to follow.
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Costs which you incur in traveling for work are generally tax deductible. The law in this area is very complex, though, and with the ATO regularly keeping a close eye on people making incorrect travel claims, it pays to take care to get it right.
Using your car for work
If you’re required to use your car for work, you are entitled to a deduction for the costs which you incur whilst at work. This specifically excludes the cost of the commute from home to work, except in very limited circumstances (see below).
Typical situations where you might be able to claim for using your car for work include:
- Traveling between workplace sites during the working day
- Traveling directly from one job to another where you have a second job (provided you don’t go home first)
- Traveling to a business related meeting with a client, supplier or prospect
- Traveling to a work-related course
There are two ways you can make this claim:
Cents per kilometre: You can claim a flat rate of 66c per kilometre for every business kilometre you cover. You’ll need to keep a diary of all work-related journeys so you can work out how many kilometres you’ve travelled for work. This method can only be used for claims up to 5,000 km’s per vehicle.
If you change your car part way through the year, you can claim 5000kms for both vehicles. Generally, if you travel more than 5000kms per year in a particular vehicle, you’ll need to use the logbook method.
Logbook: This is a way of claiming the actual expenses you’ve incurred in running your vehicle for work, such as fuel, servicing, insurance and depreciation. Deduction claims usually work our larger using the logbook method but the record-keeping requirements are more onerous. For a start, you’ll need to keep a logbook – but only for a representative twelve week period.
In the logbook, you’ll exhaustively record all your journeys – business and private – so that at the end of the logbook period, you can work out the proportion of business use for your vehicle. That proportion can then be applied to all your car expenses over the year (and over the next four years too since, once you’ve done it, the logbook is good for five years). Then, you’ll need to keep records, such as receipts or invoices, for everything you spend on your motor vehicle, so you can claim the appropriate business percentage of that expense when you come to complete your tax return.
You can’t claim a deduction for home to work travel. This is regarded as private expenditure. The only exception to that rule is if you are required by your employer to carry bulky tools in your vehicle which cannot be safely secured at work. Take great care on that point – the ATO looks very closely at such claims and disallows lots of them.
Other travel expenses
To the extent you incur a cost which isn’t reimbursed by your employer, there are lots of other items you can claim. Remember all these must be work-related and mustn’t be connected to your journey from home to work:
- Bridge/tunnel tolls
- Public transport fares
- Car parking
- Taxi fares
You can’t claim the cost of fines for speeding, parking infringements or other motoring offences.
Overnight meals and accommodation
If you’re required to travel away from home overnight for work purposes, on an interstate trip perhaps, you can claim a deduction for any meals, accommodation or incidental expenses which you incur, to the extent you are not reimbursed by your employer.
Some people who travel extensively are paid an allowance by their employer to cover those costs. Those allowances are taxable but a deduction can then be claimed for costs incurred.
Each year, the ATO publishes lengthy lists of what it regards as reasonable amounts to spend on meals, accommodation and incidentals incurred on overnight trips. Provided you’ve received an allowance from your employer and you’ve claimed less than the amounts specified by the ATO, you don’t need to keep detailed records such as invoices and receipts. If you spend more than the ATO reasonable amounts (or you don’t get paid an allowance), you must keep detailed records.
This is an area that trips up many people with the ATO, who extensively audit these claims. Some people assume they can automatically claim the reasonable amounts specified by the ATO. That is not how it works. You can claim the amount you actually spent; the ATO reasonable amounts only dictate whether or not you need to keep detailed records.
Even if you haven’t kept detailed records (and aren’t obliged to keep them because of the exemption), you still need to be able to prove that you incurred the expense. That could involve keeping credit card statements or being able to prove that you were in a particular place at a particular time.
More travel deductions
As well as work-related travel, you might also be able to claim travel (using the same rules outline above) in these situations:
- When you attend a work related course or conference. If the conference is local, you can claiming mileage or transport costs. If the course is interstate (or overseas), you can claim airfares, accommodation and meals
- Visiting a residential investment property. You can claim for inspection trips to visit your rental property – but only until 30 June 2016. Under new law proposed in the last Federal Budget, such claims cannot be made for trips from 1 July 2017 onwards.
- Visiting a tax agent. When you get your tax return done (or visit your agent for tax advice), the fee you pay is tax deductible and in addition, you can claim any related travel expenses.
Mark Chapman is the director of tax communications at H&R Block.