Business Travel Expenses
As our travel restrictions start easing up and the international borders begin opening to Australian travellers, business owners might finally look at overseas business travel once again. This could be for various reasons, such as attending international conferences or to meet with overseas businesses, etc. This article aims to provide information on what is tax deductible for overseas business travel expenditure in relation to business owners and their employees travelling.
Travel expenses are deductible when they are incurred for business or work-related purposes. In the case of an employee’s travel expenses, the business has to pay for the expenses directly or have reimbursed the employee for the travel.
The substantiation rules of the ATO requires all businesses to keep substantiation records for five years, so ensure all tax invoices, tickets and accommodation bookings are kept. For sole trader or partnership structures, a travel diary is required if traveling away for 6 days or more. The ATO also recommends all other businesses to keep a travel diary to substantiate the portion of private expenses. The travel diary should include the nature of the activity, date, time, and location of each activity – it can be in any format as long as it contains sufficient details.
It’s reasonable to expect some form of leisure activity during an overseas business trip. The important thing is separating which costs are for the business and which are not. For example, if you travelled for 1 week to a 5-day business conference during the week, and spent 2 days during the weekends sightseeing, then the accommodation and meals for the 2 days will not be deductible. The full price of the travel ticket is still deductible though, as the travel was primarily for business. In another contrary example, if you travelled for 1 week and decided to include 1 day of business conference, the trip would most likely be primarily for holiday. The travel ticket, food and accommodation would most likely not be deductible. The cost of the conference would still be deductible though.
The table below summarises what can or cannot be claimed, as well as how to apportion the expense if the trip had a private or leisure component:
| Expenditure | Allowable Deduction | Apportionment |
| Flights and travel to the location | Yes |
-Claim in full if main purpose is for business -Apportion if incidental to business -No claim if primary purpose is not for business
|
| Transport within the location | Yes |
-Claim in full if travelling to and from business activity -No claim for traveling to leisure/private activities
|
| Meals | Yes |
-Claim in full if day activity is for business -No claim during leisure/private days
|
| Accommodation | Yes |
-Claim in full but apportionment required if additional nights are booked as a result of spending leisure/private time
|
| Cost of Visa, passport or travel insurance | No |
-ATO determines these as private in nature, no deduction is allowed.
|
| Any costs in relation to non-working companions on the trip | No |
-Flights, travel, accommodation, and meals incurred by non-working companions (non-business participating partner or children), are not deductible. |
The list above includes common expenses incurred but is not an exhaustive list. When preparing your year-end financial accounts and taxation, it would be best to provide narrations or information of the business travel for us to correctly apportion and claim these expenses. We will also request these if they are required, so it’s always recommended to maintain proper record keeping. Should you have any queries in relation to a business travel, please do not hesitate to contact our office.
By James Yong – Accountant – Venture Private Advisory