The borders opening up provides the opportunity to venture overseas for business and work-related conferences. However, it can be hard to keep track of what daily expenses you can claim when you’re traveling for work or taking a holiday as part of the same trip.
Below we have created a summary of what you can claim for the parts of an overseas trip that are work-related and guidelines for eligibility.
Travel costs
In general, when you are away from home on business related travel, you can claim for costs including:
- flights
- taxis, or mileage if you use your own car for business travel
- accommodation
- meals and snacks.
Income tax deductions can be claimed for these incurred costs, however, according to a draft that has recently been released by the Inland Revenue on the Deductibility of overseas expenses,
“Income tax deductions can be claimed for overseas travel costs (other than meal costs) but
only to the extent that they have a connection with deriving assessable income or carrying
on a business.
Income tax deductions cannot be claimed for any part of the costs that are of a private or
domestic nature, of a capital nature, or incurred in deriving exempt income or income from
employment.
If the costs need to be apportioned between deductible and non-deductible amounts, then
this must be done on a basis that is reasonable in the circumstances.”
If an employee has their private costs covered by their employer (for example extending the work trip into a holiday) the employer should consider if the payment is subject to fringe benefit tax or PAYE.
Companion’s Travel expenses
If you take a significant other or companion to travel with on your work-related travel, their personal incurred costs will not be deductible unless they are making a substantial contribution to the business purpose of the trip. For further guidance on how to measure this, Inland revenue has created a guideline for Income Tax – Deductibility Of A Companion’s Travel Expenses.
Food and Drink expenses
If you or one of your employees buys a meal while travelling on business, the cost is 100% deductible.
But you can only deduct 50% of the cost of food and drink if either:
- The trip is mainly for the purpose of enjoying entertainment, eg a team bonding trip.
- The meal or function involves an existing or potential business contact as a guest.
- A celebration where you won’t be working, eg a reception, or a staff Christmas party.
You or your employees can also claim for snacks and refreshments, eg tea and coffee, while they’re away if you normally provide these refreshments at work.
If you are self-employed, meal costs are only deductible if they are over and above what you would normally spend on meals at home as stated by Inland Revenue in Income tax and GST – Treatment of meal expenses.
Entertainment expenses
On a work trip, you can claim the cost of entertainment if its purpose was to:
- build up business contacts, eg taking a potential client out for dinner
- keep your employees happy, eg providing tickets to a show
- promote your goods or services, eg offering food to entice customers to a stall at an expo
If you have any questions on what you can claim for work-related travel, talk to you Walker Wayland Accountant.
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