If you are a business owner, are an employee of your business and travel for business, there may be some advantages to you paying yourself a travel allowance instead of claiming the actual travel costs through your business. This Explainer outlines how travel allowances work and the possible benefits for business owners. However, some key points are listed below:
- The allowance that the business pays to the business owner IS tax deductible by your business
- The allowance that the business owner receives is NOT taxable
- The reasonable amounts (from the ATO) maybe greater than the actual travel expenses incurred. No tax invoices/receipts are required to be kept.
- If the travel is for more than 6 days, a travel diary, showing items such as dates travelled, appointments and places visited must be kept proving the business purpose of the travel.
- Any private travel must be excluded from the claim. For a small business, this means there needs to be a link between the travel expenses and the earning of business income.
- Follow up any meetings with clients, suppliers, etc with an email saying something like 'great to meet you' and a possible action item. This will help to confirm the business-related activity, if required in the future.
- You cannot claim the costs incurred by a spouse, unless they are substantially involved with the business and the travel must be relevant to the work the spouse does for the company.
- Fringe benefits tax may apply to the 'non-deductible' component of the travel.
If you do travel for business and feel that there may be a benefit in receiving a travel allowance, talk to your bookkeeper before you commence your travel.
