Effectively managing tax obligations is crucial for New Zealand businesses, and travel deductions provide a valuable opportunity for tax savings. By understanding which travel-related expenses qualify and documenting them correctly, business owners can maximise these deductions. This guide covers key deductible travel expenses, eligibility, and record-keeping practices, helping your business take full advantage of travel deductions.
Types of Travel Deductions for Business Trips
When planning for business-related travel expenses, it’s important to recognise the types of expenses that are typically deductible. These travel deductions are allowable only if they are directly linked to earning income and are not personal in nature.
1. Transportation Costs: Claiming Deductions for Business Travel
Travel-related transportation expenses represent a significant portion of travel deductions. Here’s a breakdown of typical transportation costs that are eligible:
- Airfares: The cost of flights exclusively for business activities, such as attending conferences, visiting clients, or consulting at different locations.
- Taxi and Ride-Sharing Services: Expenses incurred for moving between business locations, whether by traditional taxis or ride-sharing services like Uber.
- Rental Vehicles: Rental car charges are deductible if the vehicle is used solely for business travel during the trip.
- Public Transport: Fares for buses, trains, or ferries used to reach business destinations are considered deductible.
2. Accommodation Expenses: Deductible Lodging Costs for Business
While on business trips, accommodation expenses can accumulate quickly, so it’s beneficial to claim these as part of your travel deductions:
- Hotel or Motel Stays: Lodging costs during business trips, whether at a hotel or motel, are eligible for deduction.
- Short-Term Rentals: Business accommodations arranged through platforms like Airbnb can also be deductible, as long as they’re solely for business purposes.
3. Meals and Incidental Travel Expenses: Deductions for Food and Minor Purchases
Meals and incidental expenses are essential for business travellers and are among the more straightforward travel deductions.
- Meals: The costs of meals while on business travel are deductible, providing relief for business owners and employees alike.
- Snacks and Refreshments: Small purchases for snacks, tea, coffee, or other refreshments during business activities are generally deductible.
4. Entertainment for Business Purposes: Client and Partner Engagements
Expenses associated with entertaining clients or business partners can be included in travel deductions, although they may be subject to partial deduction:
- Client Entertainment: Expenses for activities like taking a client out for lunch or hosting a potential partner for dinner are generally deductible at 50%. This allowance supports relationship-building while acknowledging that entertainment has a mixed purpose.
5. Miscellaneous Travel Expenses for Business Trips
Business travel often incurs additional minor expenses, and these can also be included in travel deductions:
- Laundry and Dry Cleaning: When on an extended business trip, expenses related to maintaining professional attire can be deducted.
- Internet and Communication Costs: Internet charges, data roaming, and any business-related communication costs while travelling are deductible as they facilitate ongoing business operations.
Key Considerations for Claiming Travel Deductions
To maximise your travel deductions without risking penalties or complications, it’s essential to adhere to specific guidelines for mixed-purpose travel, record-keeping, and GST compliance.
- Mixed-Purpose Travel: Dividing Business and Personal Expenses
If a trip involves both business and personal activities, only the expenses related to the business portion are eligible for travel deductions. Business owners must apportion these expenses accurately to avoid over-claiming. Keep detailed records of both business and personal portions to substantiate these claims if needed.
- Importance of Comprehensive Record Keeping for Travel Deductions
A reliable system for recording travel expenses is vital. Businesses should retain receipts, invoices, and even maintain a travel diary that details the purpose and nature of each expense. By keeping these records, businesses can provide the documentation needed for compliance and verification of travel deductions in case of an audit.
- GST Considerations: Claiming GST on Travel Expenses
For GST-registered businesses, travel deductions may include the GST component of travel expenses. Ensure that GST is correctly accounted for in each expense and remember to file these deductions accurately in your GST returns.
The content in this blog is intended to provide general insights and should not be regarded as professional advice. Each business situation is unique, and we recommend consulting with a professional for specific guidance. At Black Arrow Business Studio, we specialise in accounting and consulting services designed to support your business’s growth and success. Feel free to contact us for expert advice and customised solutions.
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