Last year the ATO went before the Administrative Appeals Tribunal to battle against a truck driver whose large work-related travel claims grabbed their attention. The case revealed that the taxpayer had failed to declare travel allowance received from his employer as income, didn’t keep records for any work-related travel expenditure, and ultimately thought he was entitled to claim the full amount of the Commissioner of Taxation’s reasonable rates each day he travelled.
Large work-related claims like this frequently come up on the ATO’s radar, so it’s incredibly important that if you do claim such expenditure you understand what qualifies and that you keep all your records at hand.
What should I declare in my tax return?
As a general rule, you must declare any travel allowance you receive as income in your tax return. The only two cases where this doesn’t apply are when:
- The allowance isn’t shown on your payment summary
- You spent the allowance on deductible accommodation costs
What should I do to ensure I don’t make an incorrect claim?
Once a year, the Commissioner publishes the reasonable rates for travel expenses. If your claim falls within these amounts, you can deduct travel allowance expenses within Australia without being required to keep full written evidence of all the expenses. However, you may still be obligated show the basis for determining the amount of your claim and prove that the expenses were work-related.
Quite simply, the best way to ensure you don’t submit an incorrect claim is to be meticulous when it comes to record-keeping. If you are claiming above the Commissioner’s reasonable amounts, you need to have records to substantiate the entire claim, not just the amount in excess.
What are the ATO’s areas of concern?
Often misunderstood are the ATO’s reasonable rates for accommodation expenses. These rates only apply when you stay in commercial accommodation, including hotels and serviced apartments. If you stay with friends or family, you aren’t eligible to claim the ATO’s reasonable amount for accommodation.
It’s also important to note that special rules apply for travelling overnight on business. To qualify as a travel expense, you need to travel away from your ordinary residence. That means sleeping away from home, not just travelling for the day.
If you’re travelling away from home for 6 or more consecutive nights, make sure you use a travel diary to record details of all business activities. As a general rule you should keep written evidence of all expenses you use to claim a deduction. The details you should make a note of include:
- The nature of the activity
- The day and time the activity began
- How long the activity lasted
- The location of the activity
When can I claim expenses for accommodation?
The ATO website has a great checklist as well as a few case studies that will help you familiarise yourself with their rules around claiming work-related travel expenses.
To visit the site click here.