Planning to go the extra mile? The work related travel expenses generally add up pretty quickly. The taxman recognizes that these expenses can be a huge burden to the taxpayer so they offer some tax relief through deductions. A lot of work-related travel may end up boosting your tax refunds at the end of the financial year.
The mistake many taxpayers make is that they generally fail to keep records under the substantiation exemptions rule. This can be your Achilles Heel. If you go on to claim thousands of dollars in deductions, the ATO may be interested in knowing how you have arrived at that figure so you must be having a way of substantiating how these expenses have been incurred.
The situation can be dire if you make large work-related tax claims. The ATO will likely respond by launching a specific audit of your claims and making amendments where necessary, especially in cases where you have no documentation to back up your figures. The same situation will obtain if you file an appeal with the Administrative Appeals Tribunal. With no proof, there will simply be no claim even for expenses with substantiation exemptions.
What Constitutes Work-Related Travel Expenses?
The work-related travel expenses include all expenses that are related to travel for a particular job function. If you incur any travel-related expense in the process of doing your work, you can claim these if you have the necessary documentation to support it.
There are various types of work-related expenses. These include the following:-
- Parking fees
- Meals (where the work-related travel includes an overnight stay)
- Tickets for flights, train, taxi or bus fares
- Car rental costs
- Any incidental expenses
Deductibility of your Transport Expenses
The ATO has a general rule that the expenses incurred when commuting between your home and regular workplace are not tax deductible. So you cannot claim tax deductions for the cost of driving your Mercedes to and from work or for the cost of your morning and evening commute to and from work.
Similarly, the costs that an employee incurs when relocating for work or when living away from home (voluntarily) for work purposes are not tax deductible.
The work-related travel expenses that are deductible are limited to those that you incur in the process of performing your work activities such as airfares, bus costs, train and car hire or taxi. The costs incurred must be specifically work-related for you to claim tax deductions on them. Typical deductible work travel includes the following:-
- Travel costs incurred between co-existing work stations
- Special demands travel: this can involve work-related travel to remote locations
- Where there is a requirement in your job to work away from home for an extended period of time.
- Where there is a requirement for you to move constantly between changing work stations.
Overnight Accommodation and Meals
Every year, more than $2 billion worth of work-related expenses are claimed in Australia for meals and overnight accommodation costs. You are only allowed to file claims for meals and accommodation if your employer requires that you work away from your home overnight and they are incurred in the process of performing your work. You can also claim for any incidental costs incurred such as petrol and parking fees. However, these expenses can only be claimed to the extent that they are not re-imbursed by the employer.
If your employer pays you an allowance for your extensive travels during work, these allowances will be taxable. However, you can subsequently claim deductions for the costs that you incurred.
The ATO has its own benchmarks on what it considers as reasonable expenses for meals, accommodation and incidentals for work-related expenses. As long as your deductions lie within these benchmarks, you are unlikely to attract suspicion and you will not require detailed records of the expenses such as invoices and receipts. However, if your travel related expenses are outside what ATO considers “reasonable”, then you better have detailed documentation to support it because it will definitely pique their interest.
The paperwork required to claim travel expenses
While you can rely on substantiation exemptions to claim deductions without paperwork, the ATO will still require that you show them the basis for the determination of your exemptions. The burden of proof will still be on you to show that the travel expenses were incurred and they were work-related.
It is also important to keep in mind that the Australian Taxation Office’s reasonable rates benchmark for accommodation will only apply if you are staying in a commercial accommodation such as a hotel, serviced apartment or a motel. If you will be travelling for work and staying with a friend or family in work location, then you won’t be able to claim the reasonable amount. And if your claim will be above the ATO’s reasonable amount for accommodation, make sure you have the records to back it up.
Additional Tips on Claiming Travel-Related Expenses
- Ensure that you keep a travel diary that will help you back up your claims.
- Save all your receipts for the work-related travel expenses. For safer storage, snap or scan the receipts and store them in the cloud.
The bottom line
You will have to travel away from your usual home in performing your work for you to safely claim the costs as a travel expense and those expenses must be directly related to your work.