Deducting travel expenses: New ATO ruling for what you can (and can’t) claim
Knowing exactly what deductions apply to travel expenses can save a heap of hassle at tax time.
The Australian Taxation Office (ATO) has released a new ruling that clarifies what expenses employees can deduct for work-related travel.
The new ruling, Income tax: When are deductions allowed for employees’ transport expenses? was released this week, bringing together and clarifying the rules for business advisors and their clients alike.
The ATO’s new ruling sheds light on what travel expenses employees can and cannot claim
Travel between work locations (neither of which are your home), is typically tax deductible
Incidental work-related travel, such as a receptionist who makes a stop to pick up office newspapers on their way to work, can’t be claimed on tax
Travel from home to a regular place of work generally isn’t deductible. The ruling states that even if you travel to work by plane, receive a travel allowance or make incidental business-related stops on the way to work, you still cannot claim your travel expenses.
But moving between two separate work locations – like driving from your office to a construction site, or from your business to a meeting at a client’s office – can be claimed.
Tax specialist and accountant, Leo Hollestelle said the ruling is well timed ahead of the busy End of Financial Year period.
“It’s timely that these views are brought together and codified into a single ruling,” said Hollestelle. “Tax advisors will be able to more easily familiarise themselves with the rules and in turn advise their clients on it."
Where’s your regular place of work?
Interestingly, there are several exceptions that – if claimed correctly – can give you an edge come tax time. This is especially true when it comes to defining what a “regular work location” actually is.
For example, imagine you currently work for a business with an office 15-minutes from your home.
But you’re asked to cover a long-service vacancy for six months at another of your business’s offices one hour away. Because this new office becomes your regular place of work for a sustained period of time, travel to and from it cannot be claimed on tax.
But, if your period of work was only for three months, then it could be argued that the second office never became a regular place of work.
Therefore, travel could potentially be claimed on tax.
This is a call to take care in making any assumptions about what you can actually claim. As the ATO ruling states, ‘the full facts and circumstances of the specific working arrangement in place must always be considered in determining the nature and deductibility of the transport expenses incurred’.
And that’s something to keep in mind when it comes to all travel-related tax claims this tax time, as it could be this ruling also indicates an increase in scrutiny for travel-related claims.
“While the ruling is very much in line with the Commissioner’s existing views on travel expenses, the timing is worth noting,” said Hollestelle.
“After a year where many employees have been working from home, it may be the ATO is concerned there will be both workers and employers seeking to make dubious claims in the tax period ahead.”
Source: MYOB February 2021
Reproduced with the permission of MYOB. This article by MYOB Team was originally published at https://www.myob.com/au/blog/travel-expenses-ato-clarifies-what-you-can-claim/
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.