Many business owners and employees travel, so you’ll likely need to record work-related travel expenses. The good news is that business travel expenses are often tax deductible, so tracking them can help you save money on taxes. Tax deductions can lower your taxable income, so you could pay less in taxes overall. 

In this post, we’ll cover everything businesses need to know to track, record, and claim work-related travel expenses, including: 

• What are work-related travel expenses?
• Business travel expenses you can claim
• What you can’t claim
• Records you need to claim business travel expenses
• How to track work-related travel expenses

What are work-related travel expenses? 

Work-related travel expenses may include costs for business travel, accommodation, or meals. However, not all travel expenses qualify as work-related. 

Many small businesses run into issues with the Australian Tax Office when they deduct travel expenses. It can be confusing to determine what counts as a qualified business travel expense and what doesn’t.

One of the key issues employers run into is understanding the line that separates personal and business expenses. So, the ATO established clear definitions for the types of expenses that qualify to be tax deductible.

Business travel expenses you can claim

To qualify as a work-related travel expense, you or your employees must be:

• Travelling away from your home and staying away overnight
• Able to prove that the travel was necessary for your business

Some of the common travel expenses businesses can deduct are costs for:

• Rental cars and additional fees for parking, fuel, tolls, etc.
• Public transport (bus, trains, etc.)
• Taxis or ride-share (Uber)
• Airfare (tickets and baggage costs)
• Accommodations (hotels)
• Overnight meals

What you can’t claim

You can’t deduct travel expenses that aren’t necessary for conducting business. In other words, you can’t deduct your holiday. However, you can deduct the travel costs to go to another city and meet with a client. In that case, you may deduct transport, hotel, and even some meal costs. 

Other types of non-deductible travel expenses include: 

• Leisure activities while on a business trip
• Holidays during business travel
• Travel insurance, visas, and other documents
• Gifts and entertainment

If you combine a business trip with holiday, then you can only claim the portion of the trip that was for business. For example, if you live in Perth and attend a work conference in Sydney, you can claim those costs. But, if you decide to stay in Sydney a few days after to sightsee, then the extra days and money doesn’t qualify. 

To qualify part of those expenses, you’ll need to show how you separated the work from personal costs. 

Records you need to claim business travel expenses

Businesses may cover employees’ work-related travel expenses through travel allowances. However, there are specific guidelines for how much an employee may spend daily on travel allowances, which we’ll cover later in this post. 

To claim travel expenses, you’ll need to keep records. If you can prove something was a qualified business travel expense, you should have no issues with your tax return.

Businesses should keep these records for five years:

• Meal and other receipts
• Tax invoices