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How to Get the Most Out of Your Travel Allowance

Mar 28, 2018 | Accounting, Taxation

The Backyard BBQ Advice:- “Mate, In the mines hey? Get a travel allowance & stay at your mates for free, what you gotta do is BLAH BLAH BLAH”

You’re certain to hear a lot of different advice. A few simple steps upfront can start you down the path toward success.

Do it right and retain the exception to substantiate

A travel allowance is a payment made to employees to cover accommodation, food, drink or incidental expenses they incur when they travel away from their home overnight or longer in the course of their duties.

But did you know there is an exception to substantiate claims applied to travel allowance expenses if the ATO considers the total claimed to be “reasonable” and to be no more than the allowance provided. The ATO provides an annual update on reasonable travel and meal allowance expenses.

The ATO allows a claim for a deduction for travel expenses incurred without meeting the substantiation rules provided:

  • the claim for deduction does not exceed the amount of the travel allowance received
  • the travel allowance does not exceed an amount that the ATO considers to be “reasonable”

What is reasonable”?

Give the staff at DGL a call and they will run you through the published ATO guidelines on what is considered to be reasonable amounts for a travelling employee. These guidelines give a reasonable daily travel allowance amount and take the following factors into consideration:

  • destination of travel (broken down into metropolitan cities, country centres within Australia and international countries)
  • accommodation
  • meals
  • other incidentals
  • employee annual salary (in ranges)
  • specific rates for truck drivers.

Where the travel allowance received by the taxpayer exceeds the amount considered reasonable, the whole deduction will generally be subject to the substantiation rules, which require you (the employee) to keep and produce detailed records of the expenses involved.

It is worth remembering, the ATO is at pains to emphasise that this tax time it is targeting work-related expense claims such as travel costs, especially those employed in the mining industry and truck drivers — a point specifically referred to time and time again by Tax Commissioner Chris Jordan.

The other issues surrounding such allowances that should be considered is that there is a distinction between

  • travelling
  • living-away-from-home

In these times of “self-assessment” it underlines the necessity to make sure you get such claims right in the first place.

Talk to DGL, they can help.