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A taxing issue

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A mate of mine is a big business traveller and he and his wife own a private company. And because of the tax concessions he accesses, his spouse thinks it’s better value for him to sleep away from home than it is for him to be cuddled up in his own bed with her.

Ask an accountant about travel allowances and this is what you’re likely to hear: “If a reasonable travel allowance (both domestic and international) is paid to an employee for a business trip, the employer usually obtains a full deduction for the expenditure, subject to certain substantiation requirements with travel diaries and overseas accommodation expenses. The amount is not usually included on the employee’s PAYG Payment Summary.”
 
Now this is an area where the tax office is far more lenient than normal. “There are benefits to both the employer and the employee of paying a reasonable allowance as it relieves both parties of having to provide documentary evidence for most, or all of the expenses incurred up to the reasonable amount limits,” says Sydney accountant Joe Kaleb, of the AustralianBiz website.

“This is on the condition that the allowance paid to the employee has been fully spent on tax deductible business expenses. If the employee spends less than the allowance paid, or the trip is not solely for business purposes, the employer is required to show the allowance on the employee’s PAYG payment summary and the employee is assessed on this amount and claims a deduction for the business portion in their tax return.”  

The bottom line is that the tax office has created standard allowance amounts for travelling employees and the red tape substantiation can be eliminated or reduced if you work within the designated amounts.

Kaleb thinks it is better to be an employee of a company rather than being an operative in a partnership or sole trader situation. In these cases substantiation is required.

The tax office website is blunt on this: “Note this concession does not apply to self employed persons, including partners in a partnership.”

Pocket money

A trip to the ATO website — www.ato.gov.au — states that an employee travelling to Sydney with an income of $87,200 or less can have an allowance up to $247.25 a day without a need for substantiation for the employer. For Canberra it is only $211.25.

If the salary is between $87,201 and $155,000, the Sydney spend can go as high as $318.65. Those on more than $155,000 have an allowance of $404.45 a day!

Now there has been a practice of some employees living it rough and pocketing the difference, but in truth these windfalls should be ‘fessed’ up to on the employee’s PAYG summary.

Kaleb thinks the smaller the private company the more likely the ATO could ask for proof of spending from an employee but to all intents and purposes it probably falls into the ‘too hard basket’.

If an employee spends over the tax office pre-determined amounts then substantiation is required.

Far and away

So what expenses are claimable? The expenses that the substantiation exception apply to are called domestic travel allowance expenses and involve accommodation, food and drink, and incidentals.

Note, special rules apply to employee truck drivers who are not given as good a ride as an employee accountant going interstate.

Generally speaking accountants recommend keeping a diary and all relevant receipts, especially if your total bills for travelling could look above average or excessive.

What is interesting is that if you travel overseas for say two meetings and there are two or three days between meetings when you aren’t working those lay-days are tax deductible because you could hardly have gone home and then gone back for the second meeting.

In the wake of the Rugby World Cup in Paris, the travel expenses of Aussie businesspeople abroad are bound to be on the high side in 2007-08. And the incidence of husband and wife employees of companies, that they also own, I bet will be at record levels.

Published on: Monday, June 29, 2009

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