Do you sometimes take work trips for your business – perhaps to conferences, trade shows or to visit interstate or overseas clients? When a trip is clearly for business purposes only, the rules for deducting your expenses are reasonably straight-forward.
You can claim airfares, taxis and car hire (and fuel). You can also deduct accommodation and meal costs for overnight travel if the business requires you to be away from your home overnight - download our Tax Tutor for Business Travel and Meal Allowances for all the available deductions.
But what happens when you’ve planned a holiday to coincide with your work trip, or while you’re travelling for business you also catch up with family or friends?
It’s important to keep records showing which expenses are business-related and which are private.
Can I claim my full return airfares?
What is the tax-deductibility of airfares when you combine business and private travel?
Let’s assume you travel to London for a two-week trade show and stay a few extra days for sightseeing. The ATO says that if the primary purpose of the trip is for business, you can claim the whole cost of the return airfares as a business deduction, as well as related costs like travel to and from the airport. In this London example, the additional sightseeing is just incidental.
If you’re undertaking a significantly longer holiday so that the primary purpose of the trip is not just the business activity, you may need to apportion your airfares. And if the primary purpose is clearly private with some incidental work activities, you generally cannot deduct the airfares.
How is accommodation treated?
Your deductions for accommodation are limited to those nights that you’re required to be away for the business purpose. This will depend on the facts of your trip.
In the London example above, you couldn’t deduct your accommodation, meals and transport costs for the few extra nights you stayed for sightseeing - even though you could deduct your full airfares.
On the other hand, if you have to be away for an extended period and some days don’t involve work activities, you may still be able to claim your full accommodation costs.
The ATO gives the example of being interstate for two full weeks to complete a project on-site for a client. Your accommodation costs on the middle weekend (when you’re not working at the client’s site) would still be deductible. Of course, private weekend activities like sightseeing, entertainment and dinner with friends would not be deductible.
Watch out for these traps.
The following expenses are not allowed as deductions:
- travel before you start carrying on your business;
- visas, passports and travel insurance; and
- the costs of family members on your trip.
Sole traders and partners must keep a travel diary if they travel for six or more consecutive nights to record each business activity undertaken, the location, the date and its duration.
If your business is run through a company or trust structure, the ATO says it’s not compulsory to keep a diary, but it’s strongly recommended. And if you’re a company, be careful about your business paying for any private part of your travel as this could have consequences under the Division 7A “deemed dividend” rules about benefits for shareholders and their associates, as well as Fringe Benefits Tax (FBT) implications.
Next time you Travel for business.
If you don’t want to attract unwanted ATO attention to your business, it's best to speak with your Accounting Adviser here at The Peak Partnership. We can help make sure you’re getting the maximum deductions for your business travel while staying within the ATO guidelines.