If travelling is part of your work, whether an employee or business owner, you can claim certain deduction for your travel expenses. Such deductions can be as simple as a short trip to client’s office or as complicated as costs involved in overseas assignments.
What can be claimed? As a deduction, the travel expenses incurred for work-related purposes should relate directly to earning your income. More importantly, it should be an essential part of the duties that you perform and not just a form of recreation or vacation.
In this article, we’ll take you through the various travel expenses that you may be able to claim as deductions.
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. Its important to note this does not include the cost of commute from your home to work offices, except under limited circumstances.
Here are some ways you can claim your car expenses for work:
- cents per kilometre – if you travel for less than 5000 kms per year, you can claim a flat rate of 72c per kilometre. 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.
- logbook – if you’re travelling for more than 5000 kms per year for work related things, then this method is recommended. While the keeping a logbook can be tedious, your claims will generally be a lot higher than the cents per kilometre method. In the logbook, you’ll exhaustively record all you business journeys, including odometer readings at the start and end of each journey, so that at the end of the logbook period you can work out the proportion of business use of 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.
Meals and accommodation
If your work takes you away from home, you’re within your rights to claim a deduction for the cost of your meals, accommodation, incidental expenses such as laundry while away on work. But, there is a caveat here – only to the extent you are not reimbursed by your employer.
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.
These and other expenses (see below) can be claimed against your taxable income to reduce your tax liability. Be sure to include these expenses when you calculate your tax returns, whether you do it online by yourself or you ask for the service of a professional.
Public transport and taxi fares
If you travel between workplaces, and you’re using public transport, ride-sharing or hailing services, taxi services, you can claim expenses you incur as a result.
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.
Maximize Your Claims With An Experienced Accountant
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. To be able to claim these expenses as deductions, it’s important that they relate directly back to earning your income and not just recreation or vacation. This is an area that trips up many people with the ATO who extensively audit these claims so make sure your travel related expense can be claimed before submitting them on tax returns!
If you’re a contractor or small business owner look to maximize your claims with an experienced small business accountant! Consulting a professional accountant early on in the tax year will ensure you get your deductions right, don’t miss out on what you are entitled to claim and face any audits or penalty fees.