This information will help you if you are a small business owner claiming a deduction for expenses you incur when travelling for your business.
For a summary of this content in poster format, see Travel expenses (PDF, 352KB)This link will download a file.
Key points
- You must keep your business travel expenses separate from your private expenses. You can only claim the business portion.
- You must keep records for 5 years that prove your expenses.
- If you travel for 6 or more consecutive nights, you may need to keep a travel diary.
- There is a separate factsheet about business motor vehicle expenses and travelling to and from your places of business. For more information about these expenses, see Motor vehicle expenses.
Types of expenses
As the owner of a small business, you can claim a deduction for expenses that you incur when you travel for your business. Common expenses include:
- fuel, tolls and car parking
- airline, bus, train, tram and taxi or ride-sourcing fares
- car-hire fees and the costs you incur when using a hire car for business purposes
- accommodation and meals if you are away overnight.
You can't claim a deduction for any travel undertaken before you started running your business.
Claiming travel expenses
You can claim a deduction for travel expenses related to your business, whether the travel is taken within a day, overnight, or longer. You must have records to prove that the expenses were for business.
You cannot claim any private costs of the travel, for example, leisure activities, a holiday that you add onto your business travel, or the costs of a family member who travels with you.
To claim expenses for overnight travel, you must have a permanent home elsewhere and your business must require you to stay away from home overnight. You can't claim travel expenses that arise because you are relocating or living away from home.
If you operate your business as a company and it pays for private portions of your travel, there may be tax implications for you (as an individual) and your company for providing benefits to you. For more information, see Division 7A and Fringe benefits tax (FBT).
Employee travel expenses
Whatever your business structure, if you have employees who travel for your business, the business must actually incur the travel expense (by paying for it directly or reimbursing the employee) to be able to claim it as a deduction.
Your business may be subject to FBT if it pays or reimburses your employees for their travel expenses or private activities. Certain exemptions and concessions may apply to reduce your FBT liability. To access the exemptions and concessions, you may need to obtain records from your employee. For more information, see Exemptions and concessions.
If you pay your employees a travel allowance or a living-away-from-home allowance, there are different considerations.
For more information, see Fringe benefits tax (FBT) and Travel allowances.
If you are entitled to goods and services tax (GST) input tax credits, you must claim your deduction in your income tax return at the GST exclusive amount.
Records you need to keep
You need to keep records that prove all your business travel expenses for 5 years. These records can include:
- tax invoices
- boarding passes
- tickets
- travel diary
- details of how you worked out the private portion of expenses.
If you are a sole trader or partner in a partnership, you need to keep a travel diary if you are away for 6 or more consecutive nights. A travel diary is also highly recommended if you run your business as a company or trust, as it will help you to determine the portion of the travel that was for private purposes.
If you’re a sole trader, you can use the myDeductions tool in the ATO app to record your business expenses. For more information, see myDeductions.
Travel diary
In your travel diary, record the details of each business activity as you go, including:
- the nature of each business activity
- the date and approximate time the business activity began
- how long the business activity lasted
- the name of the place where you engaged in the business activity.
The travel diary can be in any format that records this information.
Example: Rebecca's travel diary
Rebecca owns a business as a sole trader landscape gardener. She is invited to exhibit at the Chelsea flower show in England. This involves 6 days of work representing her business at the show. After the show is finished, Rebecca spends some time sightseeing.
Rebecca’s son James joins her on her trip. James is not involved in the business and spends the days exploring London while Rebecca is at the Chelsea flower show.
As Rebecca is travelling for more than 6 nights, she keeps the below travel diary.
Travel diary for May:
- Saturday 9 May – 10.00am flight Q13 to London (via Dubai)
- Sunday 10 May – Arrive London 1.00pm local time. Bus to hotel in Chelsea 3.00pm
- Monday 11 May – Rest day
- Tuesday 12 May – Chelsea flower show set-up day from 9.00am
- Wednesday 13 May – Chelsea flower show day 1
- Thursday 14 May – Chelsea flower show day 2
- Friday 15 May – Chelsea flower show day 3
- Saturday 16 May – Chelsea flower show day 4
- Sunday 17 May – Chelsea flower show day 5, ends 5.00pm
- Monday 18 May – Sightseeing in London
- Tuesday 19 May – Sightseeing day trip to Oxford
- Wednesday 20 May – Bus to airport. Flight home Q23 6.00pm from London, arrive 10.00pm local time.
This shows that Rebecca travelled for 12 days. She spent the majority of the time on business-related activities and took the opportunity to do some sightseeing while in London for 2 extra days. Rebecca can only claim deductions for the business-related portion of her travel.
Rebecca can claim:
- the return airfare to London (which does not have to be separated out as the primary purpose of her travel is for business, the sightseeing was incidental)
- her bus fares to and from the airport
- the costs associated with working at the Chelsea flower show, including the exhibitor's fee and transport to and from the location from her hotel
- Rebecca’s accommodation in Chelsea up to and including 17 May
- meals and incidental costs on the days she attended the Chelsea flower show.
Rebecca can't claim:
- accommodation, meals or transport expenses on the days noted for sightseeing
- additional private costs from the whole of her time away (such as souvenirs)
- costs of visas, passports or travel insurance
- any of James’s expenses (such as his airfares, the cost of his meals or the cost of an extra hotel room for James).
Example: Noah's travel diary
Noah owns a business as a sole trader interior designer and decorator. He lives and works in Perth. A new customer has asked him to design and decorate her home in Broome. This will take 2 weeks to complete.
Noah flies to Broome on Sunday evening and returns to Perth 2 weeks later. On the weekend in Broome, he does some sightseeing and catches up with friends. He keeps the following diary:
- Sunday 1 September: Fly to Broome (depart 4.00pm, arrive 6.30pm)
- Monday 2 September: Purchase decorating supplies 9.00am–10.30am. Working at client’s house 10.45am – 4.00pm
- Tuesday 3 – Friday 6 September: Working at client’s house 7.30am to 4.00pm
- Saturday 7 September: Day trip to Horizontal Falls. Dinner with Pam and Geoff
- Sunday 8 September: Sightseeing around Broome
- Monday 9 – Friday 13 September: Working 7.30am to 4.00pm at client’s house
- Saturday 14 September: Return flight to Perth (depart 10.00am, arrive 12.30pm).
Noah can claim:
- his return airfare to Broome and taxi to his hotel and from hotel to airport
- accommodation in Broome for all nights (as the weekend in between was incidental and the primary purpose of travel was for business)
- costs of undertaking his work in Broome (such as hire of tools)
- meals and incidental costs of his work.
Noah can't claim his private expenses, including:
- the cost of the sightseeing he does on the weekend
- the dinner he has with friends.
This is a general summary only. For more information, go to Claiming a tax deduction for business travel expenses or speak to a registered tax professional.