Business Travel Expenses: What Can You Claim at Tax Time?

Some business travel expenses may be tax deductible when the trip is for genuine business purposes.

From flights and accommodation to parking and meals, business travel can quickly add up. Understanding what you may be able to claim, what is considered private, and which records you need to keep can make tax time much easier.

At i2 Bookkeeping, we believe good bookkeeping for small businesses throughout the year is one of the simplest ways to take the stress out of tax time. Here is what Australian business owners should know about recording business travel expenses.

What business travel expenses can you claim?

Generally, you may be able to claim expenses you incur when travelling for genuine business purposes.

Depending on the nature of your trip, deductible expenses may include:

• Accommodation when you need to stay away from home overnight for business
• Meals while travelling overnight for business purposes
• Domestic or international airfares related to business travel
• Public transport including trains, buses and trams
• Taxis and rideshare services
• Car hire expenses associated with your business trip
• Fuel costs
• Road tolls
• Parking fees

The important point is that the expense must be connected to your business.

Simply travelling does not automatically make every expense deductible.

What happens if you combine business and personal travel?

It is quite common to combine a business trip with some personal time.

For example, you might attend a conference interstate and decide to stay for a few extra days to explore the city. Alternatively, your partner or family may travel with you.

In situations like these, you generally need to separate your business expenses from your private expenses.

Which private travel costs generally cannot be claimed?

Costs relating to personal activities usually cannot be claimed as a business deduction. This may include expenses associated with:

• Sightseeing and tourist activities
• Entertainment and leisure activities
• Additional accommodation for a personal holiday
• Private meals and activities
• Travel costs for your partner, children or other family members where their travel is not for a business purpose

If an expense relates partly to business and partly to personal use, you may need to work out the portion that relates specifically to your business.

Keeping clear records makes this much easier.

What records should you keep for business travel?

One of the most important parts of claiming business travel expenses is being able to support your claim.

Rather than trying to piece everything together when your tax return is due, develop the habit of recording travel expenses as they happen.

Useful business travel records

Useful records can include:

• Tax invoices and receipts
• Airline tickets
• Boarding passes
• Accommodation invoices
• Car hire documentation
• Public transport receipts
• Parking receipts
• Toll statements
• Details showing the purpose of your business trip

These records help demonstrate both what you spent and why the expense was related to your business.

How long should business travel records be kept?

Under ATO record keeping requirements, business records will generally need to be retained for five years. Records should also be in English or in a form that can easily be converted into English.

Digital bookkeeping systems can make this process much simpler by allowing receipts and invoices to be captured, categorised and stored throughout the year.

Do you need to keep a travel diary?

In some circumstances, additional records may be required.

If you are a sole trader or a partner in a partnership and you travel away from home for six or more consecutive nights, you may need to keep a travel diary.

A travel diary records the business activities undertaken during your trip and can help establish which parts of your travel were business related.

Recording this information while you are travelling is much easier than trying to remember the details months later.

What should a travel diary include?

Your diary might include information such as the date, location, business activity and approximate time spent undertaking that activity.

What about employees who travel for work?

Business travel rules can also apply when employees travel as part of their job.

Direct payments and reimbursements

If your business directly pays for an employee's work related travel expenses, or reimburses an employee for eligible expenses, the business may be able to claim those costs.

Private benefits and travel allowances

However, things can become more complicated when an employer pays for expenses that provide a private benefit to an employee.

Depending on the circumstances, Fringe Benefits Tax, commonly known as FBT, may apply.

Different taxation and reporting rules can also apply when employees receive travel allowances rather than having their actual expenses reimbursed.

Because the correct treatment depends on the individual circumstances, it is important that payments, reimbursements and allowances are recorded correctly in your bookkeeping system.

What is an example of business and personal travel?

Imagine you travel from Melbourne to Sydney for a two day industry conference.

Your flights, conference related accommodation, transport between the airport, hotel and conference venue, and eligible travel related expenses may potentially be deductible because they relate directly to your business activities.

You then decide to remain in Sydney for another three days for a personal holiday.

The additional accommodation, sightseeing, entertainment and other private costs associated with those extra days would generally be personal expenses rather than business deductions.

Having your expenses properly separated and recorded makes it much easier for your accountant or tax adviser to determine what can be included when preparing your tax return.

How can you stay on top of travel expenses before tax time?

Business travel can involve dozens of transactions across different payment methods, which makes it particularly easy for receipts and expenses to be overlooked.

A few simple habits can make a big difference:

• Record expenses as soon as possible after they occur
• Keep digital copies of receipts and invoices
• Include a short description explaining the business purpose of the expense where it may not be obvious
• Keep business and personal spending separate wherever possible
• Reconcile your business accounts regularly so missing or incorrectly categorised expenses can be identified early

Good bookkeeping is not simply about keeping your accounts tidy. It gives you better financial information throughout the year and helps ensure your accountant has accurate records when tax time arrives.

Need help keeping your business expenses organised?

At i2 Bookkeeping, we help Australian businesses stay on top of their day to day bookkeeping so there are fewer surprises when tax time comes around.

From reconciling transactions and organising receipts to correctly categorising business expenses, having accurate books means you can spend less time sorting through paperwork and more time focusing on your business.

If business travel is a regular part of what you do, we can help ensure your financial records are organised, accurate and ready for your accountant.

Speak with i2 Bookkeeping today to find out how we can make managing your business finances simpler.