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.

The good news is that 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 this year announcing a focus on people making incorrect travel claims, it pays to take care to get it right.

Here’s my guide to getting your travel tax claim 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. 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 (Tip: if you change your car part way through the year, you can claim 5,000km’s for both vehicles).  Generally, if you travel more than 5,000km’s per year, you’ll need to use the logbook method (below).

  • 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 even depreciation. 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
  • Airfares
  • Parking fees (but not fines!)
  • Taxi fares

You can’t claim a deduction for items such as parking or speeding fines incurred whilst on a work journey.

Overnight meals and accommodation

If you’re required to work away from home overnight, 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 (see the current list at http://law.ato.gov.au/atolaw/view.htm?docid=%22TXD%2FTD201719%2FNAT%2FATO%2F00001%22 ). 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 another 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 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.

Because of the complexity of the rules around travel claims – this article really only skims the surface – it is well worth talking to a tax adviser like H&R Block to ensure that you are claiming everything that you are entitled to and also that all claims are correctly calculated.

Mark Chapman is Director of Tax Communications at H&R Block

 

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Let us lodge your tax return for you. Our tax accountants have the knowledge to walk you through the tax refund process with ease. We are committed to offering expert and personal service year-round at a location convenient to you.

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