You are here: Home > Blog

Home to work travel claims? Generally not, but sometimes...



As a general rule, travel from your home to your workplace is not allowed as a deduction because it constitutes a "private expense". There are however specific situations where this rule may not apply, and there can be circumstances where you may be entitled to claim some of the travel expenses between your home and your regular workplace, or even your alternative workplace.

But it is a minefield that needs to be treaded carefully so as to not end up in hot water with the taxman.

What constitutes a deductible 'travel expense'?
Individuals are typically able to claim a tax deduction for work-related travel expenses. You can generally claim the cost of travelling:

  • directly between two separate workplaces – for example, when you have a second job (providing one of the places isn't your home)
  • from your normal workplace to an alternative workplace (for example, a client's premises) while still on duty, and back to your normal workplace or directly home
  • if your home was a base of employment – you were required to start your work at home and travelled to a workplace to continue your work for the same employer
  • if you had shifting places of employment – you regularly work at more than one site each day before returning home
  • from your home to an alternative workplace for work purposes, and then to your normal workplace or directly home. This does not apply where the alternative workplace has become a regular workplace
  • if you need to carry bulky tools or equipment that you used for work and can't leave it at your workplace – like an extension ladder if you're a tradesperson or a cello if you're a musician.

What you can't claim
You can't claim the cost of driving your car between work and home just because:

  • you do minor work-related tasks – for example, picking up the mail on the way to work or home
  • you have to drive between your home and your workplace more than once a day
  • you are on call – for example, you are on stand-by duty and your employer contacts you at home to come into work
  • there is no public transport near where you work
  • you work outside normal business hours – for example, shift work or overtime
  • your home was a place where you ran your own business and you travelled directly to a place of work where you worked for somebody else
  • you do some work at home.

When can you count your home as a workplace?
You cannot count your home as a workplace unless you carry out "itinerant work"; that is, work that requires you to travel from place to place. If you do itinerant work or have shifting places of work, you can claim the cost of driving between workplaces and your home. The following factors may indicate that you do itinerant work:

  • travel is a fundamental part of your work, as the very nature of your work, not just because it is convenient to your or your employer
  • you have a "network" of workplaces you travel to, throughout the day
  • you continually travel from one work site to another
  • your home is your base of operations – you start work at home and cannot complete it until you attend at your work site
  • you are often uncertain of the location of your work site
  • your employer provides an allowance in recognition of your need to travel continually between different work sites and you use this allowance to pay for your travel.

Common examples of such workers would generally include tradespeople and shearers whose homes are the base of their operations from which they travel to one of a number of locations throughout the day over a continuing period.

Typically in these cases, the employee will show up at the employer's office periodically (like once a week) to complete or file reports, pick up supplies or organise future trips. Travel from home to the office and back made in these limited circumstances will be treated as business travel, and is as a result are tax deductible.

Below are three examples below adapted from the ATO to elucidate what can and cannot be claimed when it comes to home to work travel.

Example 1: Travel between jobs
Anna is a clerk at a large departmental store. She drives her car from her normal workplace to her second job as a waiter. After finishing work as a waiter, she goes directly home.
Yes, Anna can claim the car expenses from her normal workplace to her second job. However, she can't claim the cost of travelling home from her second job.

Example 2: Travel to an alternative workplace
Jana, a dental assistant in the city, is required to attend meetings at her employer's other clinic in the suburbs. She drives her car to the suburban clinic. As the meetings finish late, she drives straight home.
Yes, Jana can claim the cost of each journey.

Example 3: Work from home
Benjamin's employer has an office in the city but is happy for him to work from home three days a week. On these days, Benjamin sometimes has to drive into the office for a meeting before returning home to work.
No, Benjamin cannot claim the expense incurred in driving between his home and work as it is a private expense.

Above are only straightforward examples though. There will be cases where, while the nature of the office or employment is not inherently itinerant, claiming a deduction is less clear. Also remember that there are special rules for claiming expenses incurred while travelling overnight on business.

 

If you have any questions in relation to business travel or other business matters, please don't hesitate to contact our office.

DISCLAIMER: All information provided in this publication is of a general nature only and is not personal financial or investment advice. It does not take into account your particular objectives and circumstances. No person should act on the basis of this information without first obtaining and following the advice of a suitably qualified professional advisor. To the fullest extent permitted by law, no person involved in producing, distributing or providing the information in this publication will be liable in any way for any loss or damage suffered by any person through the use of or access to this information.

Tax and Christmas Party Planning

Tax & Christmas Party Planning

It's not quite Christmas time yet, but most businesses will be in the process of thinking ahead to the yuletide festivities, if not already into well-advanced planning. One of the perennial questions is if and how fringe benefits tax applies to these activities and can I claim a tax deduction.

While such social functions may result in Fringe Benefits Tax (FBT), income tax and GST outcomes, these are covered under the existing relevant legislation. The provision of "entertainment" at Christmas therefore mirrors the tax treatment such benefits will receive at other times of the year.

The cost of providing a Christmas party is income tax deductible only to the extent that it is subject to FBT. Therefore, any costs that are exempt from FBT - that is, exempt minor benefits and exempt property benefits (more below) - cannot be claimed as an income tax deduction. Note that the costs of entertaining clients are not subject to FBT and are not income tax deductible.

There is what is known as a property benefit exemption where the costs (such as food and drink) associated with Christmas parties are exempt from FBT if they are provided on a working day on your business premises and consumed by current employees. The property benefit exemption is only available for employees, not associates.

There is also the minor benefits exemption. Broadly, a minor benefit is one where it:

·         has a notional taxable value of less than $300 (inclusive of GST)

·         is provided on an "infrequent" or "irregular" basis, and

·         is not a reward for services.

Note that other benefits (such as gifts) provided at a Christmas party may be considered as separate minor benefits in addition to meals provided (referred to as an "associated benefit").  In such cases, the $300 threshold generally applies separately to each benefit provided.

Entertainment benefits

Say for example a company holds a Christmas lunch on its business premises on a working day. Employees, their partners and clients attend. Food and drink is provided at the party and the company provides taxi travel home from the party. The cost per head is $125.

Providing a party for employees, associates and clients is entertainment, because the purpose of the function is for people attending to enjoy themselves. There can be exemptions for this, but these may vary according to the recipient.

Employees: Does an exemption apply?

  • Food and drink: The food or drink provided to employees is exempt from FBT because it is provided and consumed on a working day on the business premises.
  • Taxi travel: The taxi travel is exempt from FBT because there is a specific FBT exemption for taxi travel provided to an employee directly to or from the workplace.

Associates/clients: Does an exemption apply?

  • Food, drink and taxi travel: The food, drink and taxi travel provided to the employees' partners (associates) is exempt from FBT because of the minor benefits exemption.
  • Clients food drink and taxi travel: There is no FBT on benefits provided to clients

Note that the employer could not claim an income tax deduction or GST credits for the food, drink or taxi travel provided for employees, associates or clients.

For taxi travel to or from a Christmas function, employers should be mindful that:

  • where the employer pays for an employee's taxi travel home from the Christmas party and the party is held on the business premises, no FBT will apply. 
  • where the party is held off premises and the employer pays for a taxi to the venue and then also pays for the employee to take a taxi home, only the first trip will be FBT exempt. The second trip may be exempt under the minor benefits exemption if the employer has adopted to value its meal entertainment on an actual basis.
  • the exemption does not apply to taxi travel provided to "associates" of employees (for example family members).

If other forms of transportation are provided to or from the venue, such as bus travel, then such costs will form part of the total entertainment expenditure and be subject to FBT.  A minor benefit exemption for this benefit may be available if the threshold is not breached.

What's under the tree?

Gifts provided to employees or their associates will typically constitute a property fringe benefit and therefore are subject to FBT unless the minor benefit exemption applies. Gifts, and indeed all benefits associated with the Christmas function, should be considered separately to the Christmas party in light of the minor benefits exemption.

For example, the cost of gifts such as bottles of wine and hampers given at the function should be looked at separately to determine if the minor benefits exemption applies to these benefits. Gifts provided to clients are outside of the FBT rules (but may be deductible, see below - also note that deductibility may still apply even if the gift is a "minor benefit").

The income tax deductibility and entitlement to input tax credits (ITC) for the cost of the gifts depends on whether they are considered to be "entertainment".  For example, an unopened bottle of spirits is deemed to be a property benefit (the entertainment starts after the cap is unscrewed). Again, in most cases the entitlement to an ITC for expenses incurred for the employer mirrors the income tax implications - so an ITC is only available to the extent that the expense incurred is deductible.

Regarding a business providing a gift to a client, even a former client, the ATO confirms that such outgoings are generally deductible as they are being made for the purposes of producing future assessable income. However, the outgoing is not deductible where some other provision of the income tax law prevents it from being deductible.

 

If you have any questions in relation to Christmas Parties, FBT or other business matters, please don't hesitate to contact our office.

DISCLAIMER: All information provided in this publication is of a general nature only and is not personal financial or investment advice. It does not take into account your particular objectives and circumstances. No person should act on the basis of this information without first obtaining and following the advice of a suitably qualified professional advisor. To the fullest extent permitted by law, no person involved in producing, distributing or providing the information in this publication will be liable in any way for any loss or damage suffered by any person through the use of or access to this information.

Fuel tax credit rates are updated every year (generally in February & August). It is therefore timely that the ATO has made public some common errors that taxpayers make when calculating and claiming fuel tax credits.

The tips that follow will help taxpayers avoid these errors, or you can watch this webinar recording for more information on getting fuel tax credit claims right.

Make sure the fuel is eligible

The ATO says a common mistake is to claim for fuel tax credits for fuel used for private purposes, or for traveling on a public road in vehicles with a gross vehicle mass (GVM) of 4.5 tonnes or less.

There are exceptions to what can be claimed, and so there is an eligibility tool that may prove handy.

Ensure the right rate is used

As mentioned above, fuel tax credit rates can change, so it's important to make sure the right rate is in fact being used. You can check the rates on the ATO website before lodging a BAS, or go to the ATO's fuel tax credit calculator.

Claims for less than $10,000 in a year, a taxpayer can use the rate that applies at the end of a BAS period for the whole of that period. This is known as the simplified method for fuel tax credit claims.

Is the "activity" relevant?

The ATO points out that rates can differ depending on the activity the fuel was used for. A common error is to claim credits using the "other business uses" rate for heavy vehicles travelling on public roads.

The best way to clear this up, according to the ATO, is to use its calculator (link above), but also to refer to its guidance on apportioning use in heavy vehicles to power auxiliary equipment.

Checking calculations

A common mistake is to use the cost of fuel when calculating fuel tax credits, instead of the quantity of fuel multiplied by the relevant rate.

Fuel tax credits can be worked out using the following formula:

Quantity of eligible fuel x Correct fuel tax credit rate = Fuel tax credits

The resulting amount is what if entered at label 7D on a BAS (remember to keep a record of calculations). Remember however the availability of the simplified method.

Keeping records

Accurate records are essential to ensure every fuel tax credit is accounted for. The ATO says a taxpayer needs to show:

  • the type and quantity of fuel acquired for business activities
  • the date it was acquired
  • that the fuel was used in a business
  • the business activities it was used in, such as whether it was for travelling on a public road or in other activities
  • that the correct fuel tax credit rate was used when calculating a claim.

 

If you have any questions in relation to fuel tax credits or other business matters, please don't hesitate to contact our office.

DISCLAIMER: All information provided in this publication is of a general nature only and is not personal financial or investment advice. It does not take into account your particular objectives and circumstances. No person should act on the basis of this information without first obtaining and following the advice of a suitably qualified professional advisor. To the fullest extent permitted by law, no person involved in producing, distributing or providing the information in this publication will be liable in any way for any loss or damage suffered by any person through the use of or access to this information.

 

Get in contact