Travel and accommodation deductions for sole traders

Local travel: what is business and what is commuting

Driving from home to your usual place of work is a private commute, even for a sole trader, and even if you carry a laptop. Once you are at work, travel between clients, job sites, suppliers and the bank is business. Travel from home directly to a client site can be business if your home is your base of operations (you run the business from there and go out to jobs), which is the case for most mobile sole traders. Carrying bulky tools or equipment that cannot be left securely at the work site can also make the home-to-site trip deductible.

Car travel is claimed by cents per kilometre or logbook. Taxis, rideshare, public transport, tolls and parking are claimed at cost with receipts. Parking fines are never deductible.

Overnight travel: what you can claim

When business takes you away from home overnight, you can claim:

• Flights, trains, buses, car hire and fuel for the hire car.
• Accommodation: hotel, serviced apartment, short-stay rental.
• Meals and incidentals while away, at actual cost with receipts.
• Taxis and transfers at the destination.
• Conference registration, if that is the purpose; see self-education deductions.

The purpose must be business: a client, a job, a conference, a supplier, a trade show, a training course. Sole traders claim actual costs with receipts. The ATO’s published reasonable amounts for meals and incidentals are for employees receiving a travel allowance and do not replace receipts for a sole trader.

The travel diary rule

For any trip of six or more consecutive nights away from home, keep a travel diary: for each business activity, the date, the start and finish time, the place and what it was. It can be a notebook, a calendar or a notes app, as long as it is made at or near the time. Without it, the ATO can deny the whole claim for the trip. For shorter trips a diary is not compulsory, but a note of what you did each day makes apportioning a mixed trip much easier.

Mixed business and private trips

Apportion by purpose and by day. If the main purpose of the trip is business and you add some private days, the flights are usually deductible in full and the accommodation and meals are claimed for the business days only. If the main purpose is a holiday and you fit in a client meeting, the meeting-day costs are deductible but the flights and the rest are private. If the two purposes are roughly equal, the flights are apportioned as well.

A four-day interstate conference followed by three days at the beach: flights 100%, four nights’ accommodation and meals deductible, three nights private. Write the split down at the time.

Partners, family and upgrades

The costs of a partner or family member travelling with you are private unless they are also working in the business and travelling for the same business purpose. If you share a room, the accommodation is generally deductible in full because the cost would have been the same alone, but their flights and meals are not. Upgrades to business class or a better hotel are deductible if the trip is; the ATO does not require you to travel cheaply, only for business.

GST on travel

Domestic flights, accommodation, car hire and most meals include GST and you can claim it on the BAS if registered, at the business share and with a tax invoice for anything over $82.50. International flights and overseas accommodation do not carry Australian GST, so there is no credit, though the cost is still an income tax deduction. Taxi and rideshare fares include GST; check that the receipt shows it.

Records

Receipts or tax invoices for every cost, boarding passes or booking confirmations showing dates, the diary for six-plus nights, and a note of the business purpose and any private days. Photograph paper receipts on the day and attach them to the transaction; in FlowFi, travel merchants are categorised from your bank statement and the receipt sits with the line, so a trip is ready for your accountant when you get home.