Private ruling: Company travel expenses
Date of advice: 11 January 2018
Published: June 2018
Ruling period: Year ending 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Are the taxi, flights, accommodation, and meal expenses associated with sending an employee/director of the company overseas for business purposes and discussions at the invitation of a prospective business customer fully deductible as a business expense for the company? | A1: Yes

Relevant facts and circumstances: The company was recently formed, and provides specialist advice and management of flight test and flight test programmes for both defence and private customers. The company has completed one contract so far. The company has another prospective client overseas which may provide future work for the company. A representative of the company has been invited by the prospective overseas client for a period of time, to discuss the prospect of providing the company services on a contract basis. The company will be paying the expenses. The company representative will be travelling alone, and only for the duration of business needs.

Relevant legislative provisions: Income Tax Assessment Act 1997 – section 8-1

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA) allows a deduction for all outgoings to the extent to which they are incurred in gaining or producing assessable income, or are necessarily incurred in carrying on a business for that purpose. However, a deduction is not allowable for outgoings that are of a capital, private or domestic nature. Expenditure to obtain sales for a business is generally regarded as revenue business expenses providing the advantage obtained is not capital in nature. Travel, accommodation and meal e xpenses paid by a business for their employee to travel overnight in the course of performing employment duties is generally deductible providing the expenses are not disallowed under the entertainment provisions (Division 32 of the ITAA 1997). Food or drink consumed by employees while travelling in the course of performing employment duties does not amount to meal entertainment unless a social activity is concurrently provided to the employee. Where a business reimburses an employee for meals incurred while travelling overnight on employment duties, an expense payment fringe benefit is generally provided. Section 32-20 of the ITAA 1997 allows a business to claim a deduction for meals provided to an employee where a fringe benefit has been provided. In relation to the facts of your circumstance we have considered that the company funding the travel and accommodation expenses for the representative in order to discuss future work contracts at the invitation of a prospective client are incidental and relevant to the business. The representative will be travelling for business and income producing purposes. As such it is determined that while these circumstances apply the cost of taxis, flights, accommodation and meals is a deductible business expense for the company under section 8-1 of the ITAA. Evidence to demonstrate that the trip was business related would include a diary/travel record showing dates and details of business meetings and activities, and other activities undertaken. Receipts for all business transactions and expenses need to be kept.