Are Travel Expenses Tax Deductible?

Are Travel Expenses Tax Deductible?

Is Business Travel Tax Deductible?

We are often asked whether travel in New Zealand or overseas is tax deductible.

For any expense to be tax deductible, there must be a “nexus” between income and expenditure. In other words, any expenditure the business incurs should be related to earning income in some way. So for any travel expenditure to be deductible, we have to examine the facts.

One thing we can settle straight away is that travel between your home and work is not tax deductible. Unfortunately, that’s probably the only situation that is cut and dried from a tax perspective.

The good news is that there are any number of scenarios where travel for work is not only fully justified but tax deductible. For instance, if you needed to travel to check out a new piece of equipment that you were considering buying for the business, this would generally be considered a tax deductible expense.

If you travel down the line or overseas for a conference related to your work, this will generally qualify for a deduction. It’s our very strong advice to keep as much information on any travel as possible. If you have a letter of introduction (either in hard copy or email) then keep this on file. Keep any business cards you collect, notes on the firms you visit, itineraries, conference notes and a detailed list of expenses.

In the event of an IRD audit, it is always best to have as much detail as possible to prove that the trip was legitimate.

If the travel has an element of business and pleasure, you may need to apportion some of the expenses.

If the work aspect is really only incidental to the holiday, it’s always best not to claim a deduction.

There are also occasions where you can claim the travel expenses for a spouse or family member. In this case the spouse or family member would have to be employed full time in the business and the purpose of the trip would need to be work related.

If it was a clear expectation by a host organisation that you were accompanied by your spouse or if you must be accompanied because of a health condition then the travel may be deductible. A medical certificate would be required in the case of the latter.

As always, if you are uncertain, pick up the phone and ask. Happy travels!

Angus is the CEO and founder of Generate Accounting.