business-related travel deductions

How to Maximise Your Business-Related Travel Deductions

If travel is essential to your business and you maintain proper records, you will be eligible to claim some or all travel costs as tax deductions.

Tax Deductible Business-Related Travel Expenses

Whether you are travelling for one day, overnight or for multiple nights, your business can claim a deduction for the travel expenses incurred.

In order to claim travel expenses for overnight trips:

  • Your permanent home must be in a different location, and
  • Your business activities must require you to stay away overnight

All normal travel expenses are deductible, such as:

  • Airfares
  • Public transport, Taxi, or Rideshare fares
  • Car hire fees and all costs that relate to using the hire car for business purposes (e.g. fuel, tolls and car parking)
  • Accommodation
  • Meals, if you are travelling overnight for business purposes

Travel Expenses That You Cannot Claim

When travelling for business purposes, it is important to understand that you can only claim the business portion of the travel expenses. Any expenses that are private in nature cannot be claimed.

Examples of travel expenses that you cannot claim are:

  • Holidays or visits to family or friends that are combined with business travel
  • Expenses associated with you taking family members on trips
  • Souvenirs and gifts
  • Sightseeing and entertainment
  • VISA costs, passports or travel insurance
  • Travel expenses incurred because you are relocating or living away from home
  • Travel expenses incurred before you started running your business

If your business travel consists of both business and private-related activities, you will need to keep a travel diary in order to reasonably apportion between what is deductible and what is non-deductible. Read more about travel diaries below.

Claiming Employee Travel Expenses

If your employees are required to travel for work and your business covers their travel expenses, these costs are deductible. Your business can pay for travel expenses in the following ways: 

  • Paying directly from the business account
  • Providing a travel allowance to the employee
  • Reimbursing the employee for their expenses

When covering employee travel costs, be mindful that Fringe Benefits Tax (FBT) may apply if you pay for any non-essential or non-business-related items whilst travelling, such as entertainment. However, certain exemptions and concessions can help reduce your FBT liability.

Additionally, if a company pays for the private portion of a Director’s travel expenses, other unwanted tax implications may arise, under the “Division 7A” tax rules.

For more information on FBT and Division 7A, please feel free to contact our office.

tax records

Tax Records You Need to Keep

It is important to keep all tax records relating to your travel for up to seven years.

These records include:

  • Tax invoices and receipts
  • Boarding passes
  • Tickets
  • Travel diaries
  • Details of how you worked out the private portion of your claim

Travel Diaries

Keeping a travel diary to record business and personal travel is mandatory for Sole Traders and Partners in a Partnership who are travelling for 6 or more consecutive nights and while not compulsory for other business structures, it is highly recommended to keep a travel diary wherever there is a mix of business and private activities, to ensure you can best manage any potential future queries from the tax office.

You should include the following information in your travel diary:

  • What the activity was
  • The date and approximate time the business activity began
  • How long the business activity lasted
  • The name of the place where the business activity occurred

You can keep a travel diary in any format; however, you must ensure it contains sufficient information to justify your claims.

Determining Business VS Personal Travel Expenses

Here is an example of distinguishing Business VS Personal for Travel:

Nelly, a sole trader and Technology Consultant based in Melbourne, is invited to Brisbane to speak at a conference and meet potential clients. Since she has family in Brisbane, she also plans to spend a day sightseeing and having dinner with them.

Nelly does the following:

Deductible – Purchases return airfares from Melbourne to Brisbane

Deductible – Books rideshare service to travel around the city

Deductible – Purchases meals and coffee while working

Deductible – Books rideshare service to return to airport

Not Deductible – Hires a car to go sightseeing with family

Not Deductible – Has dinner with the family

Business VS Personal expenses

Although Nelly plans to visit family during her stay in Brisbane, the primary purpose of her trip is business-related, making her airfares 100% deductible. She can also claim accommodation, rideshare fees, and meals related to the business portion of her travel. However, expenses such as the family dinner, car hire, or any other costs incurred during personal activities are not deductible. When returning to the airport, her rideshare fees remain deductible, as they are directly related to the business portion of her trip.

Maximising Your Business-Related Travel Deductions

Claiming business-related travel expenses can help reduce your tax liability, but it’s essential to understand what is deductible and what is not. By keeping accurate records, maintaining a travel diary when required, and distinguishing between business and personal expenses, you can maximise your deductions while staying compliant.

If you have any questions, please do not hesitate to contact our office on 0416 919 036.