The end of the financial year can be a busy time for businesses of all sizes. Ensuring the company’s accounting is up to date and all claimable expenses are submitted on time to the Australian Taxation Office (ATO), can be time consuming.
However, dealing with taxable travel expenses can be one of the most daunting tasks at this time of the year. Every hotel, flight, meal, taxi and Uber expense needs to be properly identified either by the company or by the employee. Here are four tips that can help you simplify the process and identify which expenses to claim:
1. Is it a company claim or an employee claim?
There’s a simple rule to discern what expenses you can claim: if you’ve paid for work-related travel with your own money and you weren’t reimbursed, then you’re entitled to deduct that.
On the other hand, if your company reimbursed you with any payments you incurred while travelling for business, then only the company can claim those taxes.
Another common practice among companies is to give employees travel allowances to cover any expenses they incur during business trips, including transport, accommodation, food, drinks and incidentals. When you receive a travel allowance, the company has to include these expenses in its tax declaration, rather than the employee.
Every year, the ATO publishes reasonable travel allowances rates with amounts based on a variety of domestic and international locations. But if a company pays a larger allowance, it needs to withhold the difference. These allowances can be claimed as business deductions similar to what they do with salary and wages.
2. What you can claim
Claimable work-related travel expenses include those incurred while away for one night and longer. These may include a variety of payments made while away such as: flights, accommodation, taxis, Ubers, car rentals and meals. Remember it’s important to keep receipts in hand.
We’ve all experienced coming back to work after a business trip with receipts scattered between suitcases, wallets, jacket pockets and more. Using expense software like Expensify, enables you to take photos of receipts and have them automatically uploaded to the company’s accounting system. The best part is you can actually capture costs on the go, making the entire process more organised and saving time.
3. Keep written record of business trips
After five consecutive nights, the ATO requires corporate travellers to keep a detailed diary with all the expenses and work-related activities they undertake during this time — including date, time, place and duration. This diary, along with any receipts and boarding passes will help support your travel tax claims.
4. When ‘bleisuring’, only include business trip expenses
In the last year, we’ve seen ‘bleisure’ travel become increasingly popular. It’s always exciting to extend your stay in another city as a personal holiday. However, it can become somewhat confusing when lodging tax returns.
Make sure you are clear on your dates and the personal activities you undertake during a business trip, and exclude any receipts from non-business expenses. For example, while a company trip to London is tax deductible, the days spent in Dubai on the way back just to visit the city are not. This also includes any sightseeing expenses you may have incurred after business hours. To make sure you have your bases covered it is sound practice to keep a travel diary whenever mixing work with your own holiday.
Ross Fastuca is a co-founder of Locomote