Travel is often an integral part of running a business, whether it’s attending conferences, meeting clients, or exploring new markets. Understanding what travel expenses are deductible and how to properly document them is crucial for Australian business owners to ensure compliance with the Australian Taxation Office (ATO) and to maximise legitimate deductions.

What Travel Expenses Are Deductible?

As a business owner, you can claim deductions for expenses incurred while travelling for business purposes. Common deductible travel expenses include:

• Transportation Costs: Airfares, train, bus, taxi, or ride-sharing fares directly related to business activities.​

• Accommodation: Hotel or other lodging expenses when required to stay away from home overnight for business.​ You can find out more here.

• Meals and Incidental Expenses: Food and drink costs, as well as incidental expenses, when your travel requires an overnight stay. Click here for more info.

• Car Hire and Associated Costs: Rental fees and fuel costs for a hired vehicle used for business purposes.​

It’s important to note that you cannot claim deductions for travel expenses incurred before you started running your business. ​

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Mixed-Purpose Travel: Combining Business and Personal Activities

When a trip serves both business and personal purposes, you must apportion your expenses and claim only the business-related portion. For instance:

• Primarily Business with Minor Personal Activities: If the personal component of your trip is incidental, you may not need to apportion expenses.​ Here are examples straight from the ATO.

• Significant Personal Component: If you extend a business trip for a holiday or have substantial personal activities, you must apportion the costs accordingly. Check out the examples straight from the ATO.

For example, if you attend a five-day business conference and add two days for personal sightseeing, you can claim expenses for the five business days but not for the additional personal days.

Travel Diaries: When Are They Required and What to Include

If you’re a sole trader or a partner in a partnership and your business travel lasts six or more consecutive nights, you’re required to keep a travel diary. While not mandatory for companies or trusts, maintaining a travel diary is highly recommended to substantiate the business portion of your travel. ​

Here is an example of a travel diary.

A travel diary should include:

• Nature of Each Business Activity: A brief description of the business purpose.​

• Date and Approximate Time: When each business activity began.​

• Duration: How long each activity lasted.​

• Location: Where the business activity took place.

The diary can be in any format, such as a notebook or digital document, as long as it accurately records the required information. ​

Record-Keeping: Evidence to Substantiate Your Claims

Proper documentation is essential to support your travel expense claims. Keep records such as:

• Receipts and Tax Invoices: Detailed receipts for all expenses, showing the supplier’s name, amount, date, and nature of the expense.​

• Boarding Tickets (if you don’t have the invoice): Proof of travel to substantiate transportation claims.​

• Travel Diary: As outlined above, when required.

• Expense Breakdown: Documentation detailing how you apportioned expenses between business and personal use, if applicable.​

Ensure you retain these records for at least five years from the date you lodge your tax return. ​

Final Thoughts

Effectively managing and documenting your business travel expenses not only ensures compliance with ATO regulations but also optimises your potential deductions. By understanding what expenses are deductible, maintaining accurate records, and appropriately apportioning costs for mixed-purpose travel, you can confidently navigate the complexities of business travel expenses.

We hope you’re enjoying our blog, just a note though. The information provided here is intended for general informational and educational purposes only. While we aim for accuracy, we can’t guarantee that this content will apply to your specific situation, every business owner’s circumstances are unique.

This blog is not a substitute for personalized advice from a qualified accountant, tax advisor, or any other professional. If you have questions specific to your individual circumstances, we strongly recommend consulting a professional for tailored advice.