Aug
24
Written by:
News Admin
24/08/2010 3:37 PM
Where an employee, company director, or office holder receives
a
reasonable allowance for travel costs within Australia or overseas and
the person makes a claim for expenses up to these reasonable amounts,
then the person is not required to keep written evidence (i.e.
receipts) of the expenses. These reasonable deduction limits are based
on the salary of the person and the destination of the trip.
Reasonable travel allowances are paid in respect of set travel
components:
- Domestic allowances include
components for accommodation, meals and
incidentals.
- Overseas allowances include
components for meals and incidentals only.
They do not include a component of accommodation which must be fully
supported by written evidence.
The travel must be for business purposes and the person must
be
sleeping away from home. Note this concession does not
apply to self
employed persons, including partners in a partnership.
The travel allowance must be paid for specific journeys
undertaken for
work-related purposes. An allowance which is paid to an employee
generally and not for a specific journey is not exempt from
substantiation. A taxpayer in receipt of a general travel allowance
must keep written evidence for all the expenses claimed.
The ATO have recently updated the allowance rates for the
2010/11 year
which are contained in Taxation Determination TD
2010/19. For example,
an employee travelling to Sydney on an annual salary of $97,100 or less
can receive an allowance of up to $293.35 a day without a need for
substantiation. For an employee travelling to Canberra, the
exempt daily rate is $255.35.
If the salary is between $97,101 and $172,700, the daily rate
rises to
$359.50 for an employee travelling to Sydney. For an employee
travelling to Canberra, the daily rate is $317.50.
There are several advantages, from both an employer and
employee
standpoint, in paying a domestic or overseas reasonable allowance
including:
- The amounts are fully tax deductible to the employer;
- The amounts are not required to be shown on the employees
PAYG Payment Summary and therefore have no PAYG withholding deducted;
and
- The employee does not need to provide written evidence to
substantiate the costs (with the exception of overseas accommodation
costs).
Accordingly reasonable travel allowances are not assessable
income of
the employee (and no corresponding deduction is claimed) subject to the
following:
- it is a bona fide travelling allowance;
- the allowance does not exceed the reasonable amount; and
- the allowance has been fully expended on tax deductible
expenses.
Where the deduction claimed is more than the reasonable
amount, the
entire claim must be substantiated with written evidence, not just the
excess over the reasonable amount. Where the allowance paid by the
employee is greater than the reasonable amount, the employee may still
use the exemption from substantiation if the deduction claimed is not
greater than the reasonable amount. In this case, the allowance must be
shown as assessable income and written evidence is not required to
support the claim.
Importantly, to get the benefit of the substantiation
exception for
reasonable domestic and overseas travel, the amount the employee
receives must be paid as an allowance. If
the amount is included in the
employees normal gross wages, the employee will need to provide written
evidence to substantiate the expenses.
Travel Diaries
The requirement to keep a travel diary is separate requirement
to that
of obtaining written evidence for travel expenses.
If the trip is within Australia,
a travel diary only needs to be
maintained where the employee is away for six continuous
nights or more
and the trip is not solely for business
purposes.
In relation to overseas travel,
a travel diary is required to be kept
only where the travel is for six continuous nights or
more regardless of
the business portion of the trip.