Its Tax Time ... again

[NM]

Just a reminder that Australian tax payers who travel for work purposes may like to check out the ATO Taxation Determination TD 2006/43 before submitting your 2006/2007 tax returns.

 

[simongr]

Always a judgement call around tax time. Just wondering how much of my luggage is deductible given I dont travel personally and wont do in this tax year...

EDIT

Hmm - just scanning through the determination the allowances for US and UK are quite generous - certainly more than I am spending - almost a shame that I am reimbursed based on receipts rather than given an allowance.

Just wondering if you arent given any alloance for incidentals whether you can claim the deduction for incidentals :-|

 

[littl_flier]

Thanks NM, I notice the auditor was the first on the case.

So is this applicable only if an employee is paid an allowance? Are they entitled/can they claim a deduction if they are on "expenses" (so essentially not out of pocket) but they claim less than their reasonable allowance and thus don't require substantiation?

Thanks,
littl_flier

 

[simongr]

OK - just having a look at this now that I am home and I am little more intrigued.

Lets assume you spent 84 days away in the past year (quite a shock when I saw that number) - and you received say a daily allowance of $150 - and you were visiting a level 5 country with asalary of $100K.

By my reckoning that would be a claimable deduction of $110 per day - being $a $9,240 - that is a huge deduction....

Also - assume you get no allowance for incidentals but meals are covered - even then it is a $4000 deduction - seems too good to be true!

 

[wallacej]

This looks good.. however not being an accountant how does this apply to me:

I am away from home for 15 nights a month in either BNE, SYD or PER. Given that my employer pays for accom, and reimburses me for dinner and breakfast (receipts reimbursed - does not appear on group cert) - what do you think this will allow me to claim?

 

[simongr]

I think you could only claim incidentals - it was hard to find a definition of these - and all I could find was:

OUS establishes the definition of incidental expenses. Incidental expenses are combined with meals into a single rate and include, but are not limited to, expenses for laundry, cleaning and pressing of clothing, and fees and gratuities for services, such as for waiters and baggage handlers.

This was from a random google search that I am using as a bench mark. So if your employer pays laundry fees then you might be out of luck.

I need to think about this as my potential deduction is over $4000 - and I havent spent that on laundry fees

 

[wallacej]

I think you could only claim incidentals - it was hard to find a definition of these - and all I could find was:

OUS establishes the definition of incidental expenses. Incidental expenses are combined with meals into a single rate and include, but are not limited to, expenses for laundry, cleaning and pressing of clothing, and fees and gratuities for services, such as for waiters and baggage handlers.

This was from a random google search that I am using as a bench mark. So if your employer pays laundry fees then you might be out of luck.

I need to think about this as my potential deduction is over $4000 - and I havent spent that on laundry fees

I think I could claim my lunches as my employer doesn't pay for that (they barely pay me!!), and I think I will have a claim for laundry.... I could use very expensive powder to get me a higher deduction, and nicer smelling clothes to top it off..

 

[Shano]

I am also a bit intrigued by all of this.

In the past 12 months I spent about 80 nights away from home for work. A fair portion of this has been in BNE, but also includes SYD, PER, ADL as well as trips to China and the US.

All of my expenses are reimbursed so this determination does not look like it will apply to me.

I was however thinking of adopting a per diem approach for the 07/08 financial year because of the tax benefit (plus I should be in a position to implement this). Typically I stay in motel style accommodation and meals would rarely exceed say $60 per day, for a total outlay of less than $200 per day.

Using the BNE example with a daily reasonable allowance of $287, I could be claiming approximately $7,000 (80 days x ~$90 per day) as a tax deduction.

As the per diem is paid for work related purposes I assume that it does not need to be declared as income.

So I would be close to $3,000 better off and my employer would not be out of pocket either compared to just reimbursing actual expenses.

Hopefully my engineering brain has interpreted this correctly.

 

[littl_flier]

There seems to be a bit of discretion here and so long as its "reasonable", any you can "prove that business travel took place" you should be ok. If your deductions are high in proportion to your income though, I would hesitate a little.

I spent probably 60 nights away in the financial year, but all except 6 were expenses reimbursed. The other 6 were perdiems, but I notice these haven't appeared on my Group Certificate as an allowance. I'm a little hesitant to claim them though because I got an interesting letter from the tax man saying i had $X,xx_ of work related deductions last year and to make sure they are in line with policies. Funny thing is, my work related deductions are already three times last years without this so i'm definitely getting audited this year. :evil: Whose your auditor, whose your auditor!!! Wait, I'm an auditor.

 

[littl_flier]

As the per diem is paid for work related purposes I assume that it does not need to be declared as income.

From my understanding, the perdiem is included on the Group Certificate as an Allowance which is then deducted using your method of thinking. Effectively, the nill effect is $0 unless you can claim more than you were paid. This is similar to car mileage appearing as an allowance and then being deducted again. The benefit is where you can claim more than the allowance that was paid- eg. I get a $55 per day meal perdiem (not including brekky) and I can claim $94.

Hopefully my engineering brain has interpreted this correctly.

 

[Shano]

Typically my deductions each year barely add up to $1,000, so If I suddenly start claiming 4 x that it may well attract the attention of the ATO.

I wouldn't have any trouble justifying the number of nights away if audited, or that they were work related.

But discretion is probably warranted as you suggested. If I stay in a motel in BNE for $85 a night and claim the allowance of $172 - is this considered reasonable.

Time to talk to the accountant I think.

 

[littl_flier]

Typically my deductions each year barely add up to $1,000, so If I suddenly start claiming 4 x that it may well attract the attention of the ATO.

I wouldn't have any trouble justifying the number of nights away if audited, or that they were work related.

But discretion is probably warranted as you suggested. If I stay in a motel in BNE for $85 a night and claim the allowance of $172 - is this considered reasonable.

Time to talk to the accountant I think.

Yes, you can claim the reasonable amount without any substantiation (receipts etc.) If you can prove you travel, then there is little they can do. You just say it costs more than I am reimbursed and they can't do anything.

Similarly, you can claim up to $300 of expenses without substantiation elsewhere. There are loopholes that can be used to an advantage, this is one of them!

 

[NM]

Its all spelled out in the TD. If you are not sure if or how the TD may apply to you, then seek advice from your taxation adviser or accountant.

 

[NM]

I wouldn't have any trouble justifying the number of nights away if audited, or that they were work related.

Read the TD. There are more requirements than just being work-related. For example, you must actually be paid an allowance to cover the claimed category (accommodation, meals, incidentals), you must have actually incurred he expense, etc.

But discretion is probably warranted as you suggested. If I stay in a motel in BNE for $85 a night and claim the allowance of $172 - is this considered reasonable.

Not by my understanding of the TD. It clearly says that the expense must have actually been incurred. Now if you have actually spent $172 on accommodation and your employer had only paid you an accommodation allowance of $100, then I believe you would be entitled to a tax deduction for the extra $72 that you had paid out of your own pocket that is in excess of the allowance paid.

And if you had actually paid $192, then you could claim $92 but would need to substantiate it by keeping receipts etc as that would exceed the amount that has been deemed by the taxation commissioner as being reasonable.

Time to talk to the accountant I think.

Indeed that is a good option.

 

[Febs]

Interesting discussion...will be having a close read of this document I think.

My rough calculations tell me I travelled around ~85 days for work in the last FY, and of that, more than half was on per-diems ($55 domestically, ~$100 internationally). The rest was on an actual-spend basis.

Thanks for the link.

Cheers,
- Febs.

 

[Reggie]

i'm definitely getting audited this year. :evil: Whose your auditor, whose your auditor!!! Wait, I'm an auditor.

Auditors auditing auditors? Do you guys have secret handshakes? Also is it like teaching, ie auditors who can't audit, audit the auditors

 

[simongr]

You have met state government auditors then....

 

[vt01]

Always speak to an accountant about what you can claim and can't claim. Although I had to educate mine as to this claim.

Here's what I do:
I am paid a per diem but it does not appear on my group certificate. I was able to verify with my employer that our per diem does qualify as a travelling allowance. We are always reimbursed for hotels so I do not claim any of the hotel allowance, only meals and incidentals. I tell my accountant how much I received in per diems and then he works out the claim based on the amount the tax office allows.
This year I travelled 35 days so was paid about $2200 in per diems while the ATO allows about $8000. So my claim for travelling expenses this year is for about $5800.
So either my employer pays far too little or the ATO's allowance is very generous! Or a bit of both... Considering this is a well known perk for politicians, it's probably more of 'generous side'

 

[simongr]

Hmm - I am seriously thinkingh about asking for a per diem rather than actuals for the current year...

Based on salary and the places I go (NY, London, HKG) I think I wouild be much better off on a per diem rate - well for incidentals at least - not sure our $400 dinners for two would be covered

 

[Shano]

This year I travelled 35 days so was paid about $2200 in per diems while the ATO allows about $8000. So my claim for travelling expenses this year is for about $5800.

OK, this is what I am trying to get clear - you have been effectively claiming the difference between what you are paid as a per diem and the maximum reasonable allowance (as determined by the ATO), even though your daily spend may be less than the maximum allowance?