41 – Travel allowances

Some advisers travel extensively for business purposes. Many clients claim the exact costs they incurred, such as airfares, accommodation, taxi fares, meals, and so on.

For clients who are employees – and all clients who practice through a practice trust are employees – there is better way that can result in hundreds of dollars of after-tax cash savings. Rather than pay for, or reimburse, costs for accommodation and incidentals, an employer can instead pay a travel allowance, which is tax deductible to the employee, and assessable to the employee. The employee can then claim deductions against this allowance as work-related expenses.

Provided the claim is reasonable an employee does not need to satisfy the detailed substantiation requirements normally applying to extended interstate or international travel. That is, there is no need to keep receipts and invoices for all the bits and pieces expended in a busy day. For example, you may be able to claim a daily deduction for staying in Auckland of, say, $400 even though your actual cost was less than this.

Income Tax Ruling TR 2000/13 sets out the amounts the ATO says are reasonable and that consequently need not be substantiated. These levels are often much higher than the actual costs connected to the travel. The amounts change from year to year and you should check this year’s amounts before you take your trip. 

The Dover Group