Expenses and travel allowance while away for work - one for the accountants

[wobbycarly]

I have heard from a not quite reputable source that when one travels for work, that any discrepancy between what the employee is paid by the company (per diem) and the ATO 'allowance' can be claimed as a tax deduction.

Before I talk to my own accountant (who knows I travel for work), can anyone else either confirm or deny this?

eg: company per diem rate: $60 per day
ATO 'recommended allowance' rate: $120 per day

Can I claim $60 per day for every day I'm away?

 

[Peter 14.7]

I have heard from a not quite reputable source that when one travels for work, that any discrepancy between what the employee is paid by the company (per diem) and the ATO 'allowance' can be claimed as a tax deduction.

Before I talk to my own accountant (who knows I travel for work), can anyone else either confirm or deny this?

eg: company per diem rate: $60 per day
ATO 'recommended allowance' rate: $120 per day

Can I claim $60 per day for every day I'm away?

No accountant here but Yes, as I understand, you can claim up to the agreed allowance tax free. Owning my own business ptd ltd I do the reverse and pay the allowance tax free with no receipts required. Thereby saving me income tax if I spend less than the allowance. In Syd it is around $180 accommodation and $80 meal and $10 incidentals per day.

However be quick, the next Fed Bidget is expected to come down on this.

But please get your accountant to verify your situation. Small changes one way or another can change the interpretation.

I travel a lot so it is worth it for me.

Peter

 

[Rob G.]

No accountant here but Yes, as I understand, you can claim up to the agreed allowance tax free. Owning my own business ptd ltd I do the reverse and pay the allowance tax free with no receipts required. Thereby saving me income tax if I spend less than the allowance. In Syd it is around $180 accommodation and $80 meal and $10 incidentals per day.

However be quick, the next Fed Bidget is expected to come down on this.

But please get your accountant to verify your situation. Small changes one way or another can change the interpretation.

I travel a lot so it is worth it for me.

Peter

You cannot claim a deduction for expenses you don't incur. TR 2004/6.

The reasonable travel allowance is a withholding and substantiation exception.

In an audit, you must still show that the travel allowance was bona fide (i.e. paid with respect to a specific journey for a specific task at a reasonably estimated cost).

You must also show on a reasonable basis that you incurred expenditure up to that amount. Any less spent must not be claimed.

You don't want any PAYG withholding, FBT or Division 7A issues.

Cheers,

Rob

 

[Peter 14.7]

You cannot claim a deduction for expenses you don't incur. TR 2004/6.

The reasonable travel allowance is a withholding and substantiation exception.

In an audit, you must still show that the travel allowance was bona fide (i.e. paid with respect to a specific journey for a specific task at a reasonably estimated cost).

You must also show on a reasonable basis that you incurred expenditure up to that amount. Any less spent must not be claimed.

You don't want any PAYG withholding, FBT or Division 7A issues.

Cheers,

Rob

That is my understanding as well.

Regards Peter 14.7

 

[wobbycarly]

You cannot claim a deduction for expenses you don't incur. TR 2004/6.

The reasonable travel allowance is a withholding and substantiation exception.

In an audit, you must still show that the travel allowance was bona fide (i.e. paid with respect to a specific journey for a specific task at a reasonably estimated cost).

You must also show on a reasonable basis that you incurred expenditure up to that amount. Any less spent must not be claimed.

You don't want any PAYG withholding, FBT or Division 7A issues.

Cheers,

Rob

Do I understand this correctly that this mean that only if I spend OVER the amount granted, then I can claim the amount I spent? I don't want to be out of pocket, I always make sure I spend within the per diem granted by my company (even if it means eating a cheap pizza or supermarket chicken for dinner ) So no extra claims for me?

 

[Mry]

I spoke to an ATO officer who came to visit me last week about this during our discussion.

He stated that the ATO are going to be looking at people who claim up to the maximum and ask why they are claiming more than what their employer paid them when there is a discrepancy between what the employer paid to cover their expenses, and the ATO's substantiation exception. They intend to ask people what they are eating for breakfast, lunch and dinner and they want to see a reasonable workings of how you came to that amount.

In these circumstances, it would be worth making a list of what you eat 'on average' at each mealtime. To really impress the auditor, you could keep receipts for some of the meals (say 10%?) to show an example of how the money is spent.

For me, its just another example of how funny tax can be, that the ATO's 'reasonable travel and overtime meal allowance expenses' are considered by their auditors to be unreasonably high to the point that taxpayers have to justify making 'reasonable' claims.

The ATO's views on this substantiation exception can be found on this tax ruling -
http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR20046/nat/ato/00001

 

[Mry]

Do I understand this correctly that this mean that only if I spend OVER the amount granted, then I can claim the amount I spent?

I'll give you three scenarios.

Your employer pays you $20 to cover the cost of dinner while on travel overnight to a location where you must perform a specific task during the 2011 year. The dinner claim according to the schedule is $40.65 at your salary level. Later, you are audited.

1 - You claim $20 as a deduction against the $20 allowance. You worked out that for travel that night, you bought a $20 Pizza Hut package for delivery to the hotel you were at that night. You don't have a receipt, but you can show the deal you purchased and the price at Pizza Huts website as an example.
2 - You claim $40.60 as a deduction. It's below the substantiation exception so no receipts are required, except the auditors want to see workings of how you came to that amount as a reasonable cost for that night.
3 - You claim $50 as a deduction. If you exceed the amount declared to be reasonable by the ATO, you need to come up with the receipt to justify the claim. If you spent $80 on dinner that night, you can claim $80 regardless of what your employer paid or what the ATO show on their schedule but you need the receipt.

I don't want to be out of pocket, I always make sure I spend within the per diem granted by my company (even if it means eating a cheap pizza or supermarket chicken for dinner ) So no extra claims for me?

That sounds pretty low. If your allowance is really low, the ATO may consider that it is not a bona fide travel allowance and deny any substantiation exception under para 61 of TR 2004/6 where they say -

"61. A token amount of allowance, for example $5 per day to cover meals for travel that involves sleeping away from home, would not be considered a payment that is expected to cover the purchase of three meals per day while travelling for work. The payment would not be considered a travel allowance for the purposes of the exception from substantiation. "

 

[wobbycarly]

Thanks for all the replies, but I'm still confused.

I get paid $55 per diem; ie, per day that I'm away. So if I go for a single night, I get 2 x per diem = $110. I can live it up on that!

But by the time I'm away for 5 days (4 nights), that gives me $275. At $10-$12 for lunch ($50-$60) and the same for breakfast, that leaves about $150-$175 for 5 dinners = $30-$35/dinner. Even at a bistro, one is lucky to get a main and a couple of cokes for that; and eating in room, well!!

But it sounds like I'll either need receipts, or some other documentation before I can claim anything.

The way it had been explained to me (by a layman), was that for every night was away, I could claim the difference between the per diem and the ATO allowance, without substantiation. Sounds like that's NOT the case, and doing so might be "risky", in that it could invite an audit.

Thanks again.

 

[marg4000]

If you are able to claim the excess spend, then surely you would have to offset that with the times you spend below the allowance ??
Marg

 

[wobbycarly]

If you are able to claim the excess spend, then surely you would have to offset that with the times you spend below the allowance ??
Marg

If something sounds too good to be true, it probably is!

There really is no logic to suggest I can claim an expense when I haven't had an expense. But if my spending went over the per diem, I could claim that.

So I'll just stick to the budget!

 

[Peter 14.7]

If something sounds too good to be true, it probably is!

...... suggest I can claim an expense when I haven't had an expense. But if my spending went over the per diem, I could claim that.

So I'll just stick to the budget!

Yes, there is no logic to this. From what I understand it is more a ease of accounting situation and one of the reasons we do it. If I stay away three nights , I pay myself three nights at $180 rate for Sydney. Saves tallying each receipt etc...

I suggest you see your accountant on your situation if you are doing it a lot. In the right scenario you can win.

I..e get paid $180 tax free and stay with friends. Buy them take out food at $40 and you have made tax free $140.

So whilst $180 per night accommodation in Sydney may seem high, it is not really. A 4 to 5 star typical business hotel on super special is say $140 but more often $180 to $220 and on a busy night like Valentines Day or State of Origin $350 minimum. So paying you only $180 your employer gets off cheap and with ease and tax department does not subsidize luxury lifestyle. It also says receipts being check and reimbursed each time.

Meals at $80 a day is again, not that much. Eat in Hotel and mains are $30 to $40. Add desert say $10. Coffee say $4. Breakfast in Hotel and it can be up to $35. Try a cafe as you are at $10. Lunch is easily $10. Coffee here and there $3 each. It adds up.

I buy most things on my personal card so should the ATO come calling I can show what I spent. The other factor is bona fides and reality check. If you travel to work and can show that travel made a lot more $$ than the costs and that you are in true business then ATO will have no argument.

Where ATO have an issue is someone ( in the case of IP) traveling by plane, with family to Qld to inspect their one unit and then spending two weeks on holiday and claiming the lot. In that case they say only percentage like 10% is claimable and for you only, not the wife (unless on title) and not the children.

Same for me, wishing to visit France, I could align it with a conference and taking wife as she is part of Company but only there and back with little delay in between. As for daughter, no way. And if that conference had very little to do with the business then again, they may refuse.

It is an anomaly and so far, worked well, a good one.

Like a Ute. If 1 tone capacity and you have legit business they have no log books. Personal use is not recorded. The fact it could be a Hilux cab chassis tray work horse or Hilux SR5 Crew Cab with luxury kit, ac, leather, etc.. does not count. One of reason Hilux's sell so well here. But if you are say and doctor in the city, and you want write of the latest VW Amarok Dual Cab...may have trouble. If your a Vet, probably in with a chance.

I advise, if you do legit business travel, send you accountant an email with your situation and ask advice, that what i do.

Hope this helps, Peter 14.7

 

[Sim]

I concur with Peter 14.7 on this ... speak to your accountant and do things the way they suggest. I ended up putting this in the too hard basket and never did make extra claims when I used to travel > 50% of the time for work.

We did try and make it a game at one point - see how much "profit" we can make from our trips by minimising food spend to maximise in-pocket per-diem.

It used to be company policy that all approved hotels included breakfast in their room rates, so we used to love staying at a Sheraton or Hilton and enjoy their buffet breakfasts!

But then when the company accountants starting penny pinching (or more realistically, the hotels started demanding more than $160 per night to stay at the Sheraton - that was a bargain!) ... I started travelling with a plastic bowl and spoon and buying cereal at the local mini-mart and a 600ml carton of plain milk to keep in the bar-fridge overnight ... that kept me fed for breakfast.

Lunch was usually a food-court, and frequently, so was dinner. When travelling 100+ nights a year, you do get sick of eating out at restaurants all the time - sometimes you just want a quick and light meal.

Room service became (an expensive) fallback only for those nights we were too exhausted to go out to find cheaper food.

Some cities the per-diem was way out-of-whack with what cheap meals actually cost, sometimes we would make a huge profit, other times we would be out of pocket, even after eating cheaply. This was especially the case overseas.

 

[Aaron_C]

We did try and make it a game at one point - see how much "profit" we can make from our trips by minimising food spend to maximise in-pocket per-diem.

I know a guy who, when he eats lunch/dinner with us as a group, takes the receipt to claim from his work, even on a Saturday/Sunday. Oh and he uses his employer's credit card to pay as well, and keeps any excess money/change from each person. So it can be profitable! The price is though - he'd have to find someone else to eat with because I hate cheapskates.

 

[Sim]

I know a guy who, when he eats lunch/dinner with us as a group, takes the receipt to claim from his work, even on a Saturday/Sunday. Oh and he uses his employer's credit card to pay as well, and keeps any excess money/change from each person. So it can be profitable! The price is though - he'd have to find someone else to eat with because I hate cheapskates.

It's also not honest.

 

[wobbycarly]

*snip*
But then when the company accountants starting penny pinching (or more realistically, the hotels started demanding more than $160 per night to stay at the Sheraton - that was a bargain!) ... I started travelling with a plastic bowl and spoon and buying cereal at the local mini-mart and a 600ml carton of plain milk to keep in the bar-fridge overnight ... that kept me fed for breakfast.
*snip*

SNAP! I'm sure anyone going through my briefcase would wonder why there is a spoon in there!

And because the company will pay the accommodation via expense claim, I try and get the travel agent to book me a hotel with a rate that includes breakfast. Doesn't always work out.

 

[Peter 14.7]

SNAP! I'm sure anyone going through my briefcase would wonder why there is a spoon in there!

And because the company will pay the accommodation via expense claim, I try and get the travel agent to book me a hotel with a rate that includes breakfast. Doesn't always work out.

Thats nothing, as Crocodile Dundee says:

"Call that tight, that's not tight, THIS is tight"

I regularly stay at YHA Backpacker. $40 a night, share with three others lads. WHY Fascinating experience and most of the time, I so tired I could sleep on the street.

Yet when Mrs 14.7 comes it "magically" turns into the Sydney Hilton. Funny that?!?! I guess shows who really runs our company! I once took her to the YHA to say "See honey, it not that bad....Couple room... Honey?" It looks could kill LOL

Don't do the spoon but I know the good places to eat and if I pay more that $10 for ribs or a good steak I feel robbed. Best deal is I can get fresh made burger (meat and salad) and a beer for $5.

On the Hotel breakfast I take it if free upgrade but it is not good for the diet doing breakfast at somewhere where the food is free and the range huge.

Regards Peter 14.7

 

[Property Meister]

ok, so what about expenses and travel costs for a reno (sorry to hijack) assuming its not part of your job?

obviously flying to a differnet area, staying in a hotel while doing the reno should be claimable,

what would happen if you arent doing the work and just overseeing??

I recently did a reno, and a gesture of good will, provided my tradiers, with lunch, food, drinks, snacks and a big bender, surely any recipet from coles/woolworths, and slabs of beer from the bottle shop should be claimable

 

[Peter 14.7]

As I understand.

Yes to your expenses if you are undertaking repairs but you cannot pay yourself a wage.

No to tradies unless your contract (written) says you will provide food. And then why would it. If remote, fair enough but really remote. They can pay and claim the expenses against you though.

No to alcohol in almost all circumstances, including as director, owner, staff, etc.. and that is why an allowance works and many meals offer complimentary (aka we build in the price) glass of wine or hotels/airlines have executive club/ business lounge access (drink included).

Again, CHECK with your Accountant. If bona fide then ok.

Regards, Peter

PS Sounds luxurious....No I would rather be in my bed with my wife and eating meal at my home than any of the above, regardless of how free it is, alcohol or other.

PPS And Eating out as a one is sad, have to take a book or scan mobile, you feel like a leper.

PPPS A hotel room for one is an expensive way to watch TV.

 

[wobbycarly]

PS Sounds luxurious....No I would rather be in my bed with my wife and eating meal at my home than any of the above, regardless of how free it is, alcohol or other.
Agree
PPS And Eating out as a one is sad, have to take a book or scan mobile, you feel like a leper.
Or the latest API
PPPS A hotel room for one is an expensive way to watch TV.

Or if you don't watch TV and watch what you WANT to watch on the laptop

Do I sound "sad"?

 

[redwing]

I have heard from a not quite reputable source that when one travels for work, that any discrepancy between what the employee is paid by the company (per diem) and the ATO 'allowance' can be claimed as a tax deduction.

Before I talk to my own accountant (who knows I travel for work), can anyone else either confirm or deny this?

eg: company per diem rate: $60 per day
ATO 'recommended allowance' rate: $120 per day

Can I claim $60 per day for every day I'm away?

Most of the places myself and others travel to with work, meals and accommodation are supplied and at the one place where meals aren't supplied, the daily allowance given for meals as a reimbursement is about $38.00