Is travelling overseas tax deductible?
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Articles by Anna Loginova
If you have to travel overseas for business (given you can do so now with the borders finally open), the question of tax deductibility of travel expenses will arise: which expenses can you claim, if any?
It is important to understand the purpose of the trip in order to decide how the treatment of these expenses will be applied. In a nutshell, travel expenses are income tax deductible to the extent that there is a direct connection in generating assessable income. I give a brief overview below, but you should call your accountant before you leave, as it is much more complicated than it first appears.
There are three main categories:
1. Work-related trip and incidental holiday
Let’s say you are away for 14 days on a business trip and take a free half day to visit a museum. In this case, the ‘holiday’ portion of your trip is incidental, and so your travel expenses are 100% tax deductible.
Note that if the business is run via a company, travel costs that the employer pays for which are not business related could be subject to PAYE or fringe benefit tax.
2. Business and private trip
In this scenario, you are away for 14 days, of which 7 days are for business and 7 days are spent driving around the countryside. The apportionment of costs needs to be made between deductible and non-deductible expenses depending on which costs are business related and which are private in nature. In this case, the percentage will be split 50/50.
3. Private trip with incidental work
What about if you are away on holiday for 14 days and take a half-day trip to drop in and say hello to a few business clients? In this case, none of the travel expenses are tax deductible.
But wait, there’s more
On the face of it, seems fairly simple. However, the phrase “but wait, there’s more” certainly applies here, and it can get very complex. Can you claim meal expenses? That depends on a number of factors. What about accommodation? Again, not as cut and dried as is it may seem on the surface. What if you were going to make the overseas trip regardless (e.g. for a family event)? In this case there could be an argument that your travel expenses are not tax deductible.
This is why you need to talk to your tax adviser before you leave about what you can and can’t claim with regard to business travel. Please contact us as soon as you have talked to your travel agent, as we will need to have a discussion about the expenses related to your trip. Then all you need to do is have a safe journey and enjoy the freedom open borders provide!
Anna Loginova
Client Services Manager
© Gilligan Rowe & Associates LP
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Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.
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