Tax traps you need to know for business travel

Every time you get on a plane, nearly half your fellow passengers are business travellers. Small business owners traveling for business, plus employees not being reimbursed for their travel costs by their employers, need to know what expenses are tax-deductible.

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What can you claim?

If you are required to travel as part of your business, profession or job, any costs which you or your business incurs are potentially tax deductible. Small business owners can deduct those costs as operating expenses. Employees who are not reimbursed for these expenses can deduct them as work related travel expenses. The kinds of expenses which you might incur, and which might be deductible include

• Transportation – costs of flight, train, bus, car, taxi, etc.

• Accommodation and meals – room, meals, laundry, telephone and internet services

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You know what they say about all work, no play…

Statistics indicate that two out of three business travelers are mixing business with pleasure by adding some “me-time” time to at least one business trip every year, which might be an economical option when following these guidelines:

• The primary purpose of the trip must be business-related for the business portion of the expenses to be tax-deductible. So, if you spend two weeks in Far North Queensland but the only business element is a one hour meeting with a customer, you might struggle to claim anything!

• Doing some work on holiday is not the same thing as bringing a partner or your family on a business trip. The only expenses deductible are those that would have been incurred if the business owner or employee had travelled alone and not extended the trip for leisure.

  • If you stay on after a work assignment for a few days, the cost of your return flight will be tax deductible, because you’d have had to take that return flight even if you’d come home as soon as the work part of the trip ended. But any accommodation or other expenses, such as meals or car hire, which you incur after the work-related element ends won’t be claimable

  • The nightly rate for a room that could accommodate one person is the amount that can be deducted. The cost of that family size suite to accommodate spouse and kids who’ve travelled with you doesn’t qualify.

  • Meals, travel and other expense costs incurred can only be claimed for the employee or business-owner, not traveling companions.

Still not sure what might be a deductible expense? When on a business trip, keep all your receipts and a travel diary and talk to H&R Block to help you determine what is deductible.

Mark Chapman is the Director of Tax Communications at H&R Block.