For many business owners and employees, travel is a necessary part of work. Keeping an accurate record of work-related travel expenses is essential—not only for budgeting but also for tax purposes. The good news is that many of these expenses are tax-deductible, which can reduce your taxable income and help lower your overall tax bill.
In this guide, we’ll cover everything you need to know about tracking, recording, and claiming business travel expenses, including:
- What qualifies as a work-related travel expense
- The types of travel costs that are tax-deductible
- Expenses that cannot be claimed
- The documentation required for tax purposes
- Best practices for tracking travel-related expenses
What Are Work-Related Travel Expenses?
Work-related travel expenses refer to costs incurred while traveling for business purposes, including transportation, lodging, and meals. However, not all travel-related expenses qualify for tax deductions.
One of the most common issues businesses face when claiming travel deductions is distinguishing between personal and business expenses. To clarify these distinctions, the Australian Tax Office (ATO) has provided clear guidelines on what can be classified as a deductible business expense.
What Business Travel Expenses Can You Claim?
For a travel expense to be deductible, it must meet the following criteria:
- The employee or business owner must be traveling away from home and staying overnight for work purposes.
- The travel must be directly related to business operations.
Common travel expenses that qualify for deductions include:
✅ Rental car expenses, including fuel, parking, and tolls
✅ Public transportation costs (bus, train, etc.)
✅ Rideshare or taxi fares (Uber, etc.)
✅ Airfare, including tickets and baggage fees
✅ Hotel and accommodation costs
✅ Meals when traveling overnight for business
Expenses That Cannot Be Claimed
Not all travel expenses are eligible for tax deductions. The following cannot be claimed:
❌ Leisure activities or sightseeing during a business trip
❌ Personal vacations taken in conjunction with a business trip
❌ Travel insurance, visa applications, or related documents
❌ Expenses related to entertainment, gifts, or non-business activities
If a trip includes both business and personal activities, only the portion of the trip directly related to business can be claimed. For example, if you travel from Perth to Sydney for a work conference, you can claim expenses related to the conference. However, if you extend your stay for personal travel, the costs incurred during those additional days are not deductible.
To claim part of a trip, you must provide clear documentation showing how business-related costs were separated from personal expenses.
Required Documentation for Business Travel Claims
Many businesses reimburse employees for work-related travel expenses through travel allowances. However, there are strict limits on how much can be spent under these allowances.
To successfully claim business travel expenses, maintaining proper documentation is crucial. The ATO requires businesses to retain records for at least five years to support their claims. These records may include:
📑 Receipts for meals, transportation, and other travel costs
📌 Tax invoices for accommodation and flights
🎫 Ticket stubs and boarding passes
📖 Travel diaries documenting business activities
Additionally, businesses can support their claims with:
✔️ Signed contracts or agreements
✔️ Documented meeting schedules
✔️ Email confirmations of business-related travel
Methods for Tracking Business Travel Expenses
Businesses have multiple options for covering and tracking work-related travel expenses, including:
- Direct payments using a company card or business bank account
- Reimbursement programs where employees are reimbursed for work-related expenses
- Providing a travel allowance for business trips
It’s important to note that employees cannot claim expenses on their personal tax returns if they have already been reimbursed or covered by the company. Instead, businesses can claim these expenses as tax deductions.
⚠️ However, if a business provides travel allowances, they may be subject to fringe benefits tax (FBT). For example, if an employee receives a living-away-from-home allowance rather than a standard travel allowance, this may trigger FBT obligations.
Maintaining accurate financial records is essential to ensure compliance and avoid tax-related issues. Below are some best practices for tracking business travel expenses efficiently.
1. Educate Employees on Eligible Travel Expenses
One of the most effective ways to prevent errors and missing records is to train employees on how to track and report travel expenses before they travel for work. Providing a clear list of eligible and ineligible travel expenses can help employees understand what can be claimed.
If your business provides travel allowances, inform employees of the ATO’s daily limits for meals, accommodation, and incidentals. These limits vary based on location and travel conditions.
Employees should also be encouraged to keep all receipts and supporting documents while traveling for work.
2. Use Expense Tracking Tools
The ATO requires businesses to keep travel-related records for five years as proof for tax claims. Fortunately, there are several expense-tracking apps that simplify record-keeping by allowing digital storage of receipts and invoices.
For instance, sole traders can use the ATO’s myDeductions tool, while larger businesses may benefit from Xero or MYOB, which offer built-in expense tracking features.
3. Maintain a Travel Diary
If a sole trader or business partner travels for work for more than six consecutive nights, the ATO requires them to maintain a travel diary. This log should include:
📅 Dates of travel
📝 Business activities completed each day
⏳ Time spent on business-related tasks
A well-documented travel diary helps verify travel expenses and aligns with receipts and other supporting records.
Even if a trip is shorter than six nights, keeping a travel diary can be useful, especially if employees need to justify their expenses for tax purposes.
4. Work with a Bookkeeper for Expense Management
The ATO has strict guidelines regarding what qualifies as a deductible travel expense, and misreporting expenses can lead to penalties. Business travel costs can also become complex, especially for fast-growing companies managing multiple employees who travel frequently.
Outsourcing bookkeeping services can help businesses accurately track, record, and report travel expenses, ensuring compliance with ATO regulations.
For instance, Tax Visory provides expert bookkeeping services to help businesses organize their financial records and ensure all travel expenses are properly documented. By keeping detailed records, businesses can easily claim deductions and avoid tax complications.
