Travel allowances and the proper use of the exception to substantiate claims
A travel allowance is a payment made to employees to cover accommodation, food, drink or incidental expenses they incur when they travel away from their home overnight in the course of duties.
In most circumstances, when claiming other deductions, you will be expected to be able to substantiate the expense being claimed with documentary evidence, and produce that evidence should the ATO request it.
However an exception to substantiate claims applies to travel allowance expenses if the ATO considers the total claimed to be “reasonable” (more below) and to be no more that the allowance provided. Guidelines on these amounts are updated annually.
There are three administrative concessions that relate to travel allowances – for employees there is the substantiation exception as mentioned above, but for employers there is also a withholding exception and a payment summary exception.
Recently the ATO has been at pains to emphasise that the first of these travel allowance concessions does not extinguish the requirement for the employee to actually incur the expense. The taxpayer may not be required to substantiate it in a written form like other deductible work expenses, but the expense must still have actually been incurred to be able to claim a deduction.
It will also pay to remember that if you rely on the exception from substantiation, the ATO may still require you to show the basis for determining the amount claimed, that the expense was actually incurred, and that it was for specific travel costs and for work related expenses.
And remember, the ATO seems to be at pains to emphasis that this tax time it is targeting work related expense claimed such as travel costs – a point specifically referred to by Tax Commissioner Chris Jordan in an address made to the Press Club in Canberra in early July.