Deductible travel allowance expenses
Receiving a travel allowance from your employer does not automatically entitle you to claim a deduction for travel expenses.
A travel allowance expense is a deductible travel expense:
- you incur when you're travelling away from your home overnight to perform your employment duties
- that you receive an allowance to cover
- for accommodation, meals (food or drink), or incidentals.
You incur a travel allowance expense when you either:
- actually pay an amount for an expense
- have an obligation to pay an amount for the expense.
You can't claim a deduction if your employer either pays for or reimburses you for the expense.
If you don't incur any deducible travel allowance expenses, there is no need to consider if a travel allowance record keeping exception applies.
Example: no deductible travel allowance expenses incurred
Ainsley lives in Melbourne and is the regional manager of a clothing store chain. She must travel to Sydney for 3 days to attend the annual conference of managers.
Ainsley’s employer pays for her accommodation in Sydney, but she buys her own meals. When she returns to the office, Ainsley puts in a reimbursement claim for her meals, and her employer reimburses her for these expenses.
As Ainsley doesn't incur accommodation expenses and receives a reimbursement for the meal expenses, she can't claim a deduction for these expenses.
Since Ainsley hasn't received an allowance and she can't claim a deduction for her accommodation and meals, she doesn't need to consider whether she can rely on the travel allowance record keeping exception.
End of exampleWhat to do if you receive a travel allowance
If your travel allowance is shown as an allowance on your annual income statement or payment summary, you:
- must include the allowance as income in your tax return
- can claim a deduction for the amount you spent on deductible travel allowance expenses
- keep detailed travel expenses records
- you don't need to keep detailed records if your deduction for travel allowance expenses is within the reasonable amounts we specify.
If your travel allowance isn't shown on your annual income statement or payment summary and you spent the whole amount on deductible expenses, you:
- don't include the allowance as income in your tax return
- can't claim any deduction for your travel allowance expenses
- don't need to keep written evidence or travel records.
If you do this, you will not pay any income tax on your travel allowance.
However, if you spent more than your travel allowance on deductible travel allowance expenses, you:
- include the allowance as income in your tax return
- can claim a deduction for your travel allowance expenses
- keep detailed travel expenses records
- you don't need to keep detailed records if your deduction for travel expenses is within the reasonable amounts we specify.
Example: travel allowance on income statement
William works for a company in Sydney. William’s employer requires him to visit clients in country New South Wales once a month. This involves William sleeping away from his home for 3–4 nights.
William’s employer pays him an allowance of $150 per night to cover accommodation, meal and incidental expenses, and includes the allowance on his income statement.
As William’s employer reports the travel allowance on his income statement, William must include the allowance as income in his tax return. He can claim a deduction for the amount he spends on accommodation, meals and incidental expenses while he is travelling away from his home overnight for work.
Unless he can rely on the travel allowance record keeping exception, William will have to keep receipts or other written evidence for all his accommodation, meals and incidental expenses.
End of example
Example: travel allowance not reported on income statement
George's employment duties require him to occasionally travel away from his home overnight. When he travels overnight for work, his employer pays him an allowance of $80 to cover accommodation expenses and reimburses him for the cost of his meals. George's employer doesn't show the allowance on his income statement.
When George travels overnight for work he stays in the same place, which costs him $100 per night.
As the travel allowance isn't on George's income statement and he has spent the entire allowance on deductible travel allowance expenses, he doesn't need to:
- declare the travel allowance as income in his tax return
- keep written evidence of his accommodation expenses.
George also can't claim a deduction for the expenses.
However, as George has spent more than the amount of the allowance on deductible travel allowance expenses, he can include the amount as income in his tax return. He can then claim a deduction for the amount he spent on accommodation. Unless George can rely on the travel allowance record keeping exception, he will have to keep written evidence.
End of example