Before we start, if you are going to travel and claim everything you can while seeing this great country, make sure you get advice from an accountant; this is a guide using information from all over the place and is also aimed at Australian tax laws only. This is a guide more so to inspire the right questions that you should ask a tax agent or accountant. Done right and you could be surprised how much you are allowed to claim at tax time.
So many people miss out on tax deductions that can be claimed while working on the road, Could it be worth setting up a business so you can claim for part of your trip? Most times all you need is an ABN and a good idea, both of these could be a way to saving thousands when you hit the road. The bonus is you can make money while you travel and claim things you never thought of as soon as you leave for the trip of a lifetime.
There is much more than just fruit picking work out there and the work is easy to organise through job networks such as No Boundaries and Work About Australia.
The ATO doesn’t care what you are doing just more so that you are working and how you do that, so travelling around Australia with careful planning should see people able to declare motor vehicle expenses, daily meals and accommodation the minute they hit the road.
The trick with the ATO is they don’t care what your job title is, but how you go about getting work and where you work it is.
The main way to maximise a tax deduction while travelling is to:
Have a network of workplaces in advanced. Meaning you prepare and organise the next job before you leave the existing one.
Always to remember to keep records, journals and compiled proof to verify any claim.
Continue to keep a base or home other than the places you visit, example a room at relo’s house, having a street address for mail is handy for many reasons when travelling.
Never establish permanent living quarters where you work, don’t lease a property.
Never remain anywhere for a longer than 6 months and make sure you live in non-permanent living quarters like a motor-home, caravan or tent.
Another way to claim your car expenses if you have to carry tools for work, and they weight more than
20kgs or anything large or awkward that you need for work while travelling; this may also qualify you for some great deductions including depreciation on vehicles
The best way to get the most out of a working trip would be if you are self-employed, there seems to be a tricky ruling I come across all the time while looking for deductions and that is shearers, like most things tax and legal, it’s always a precedent that matters, and shearers seem to have the most in common with travelling and work for the best deductions possible. So the trick is when possible is to align how you work with a industry that gets the best perks. So that said, Shearers are able to claim their motor vehicle costs, meals and accommodation from the moment they leave home.
It is how you go about your work not your occupation that counts.
Couples can get some great deductions by using ways to calculate income separately. Couples can possibly claim each other as dependants, got kids? then your taxable income will most likely boost any Centrelink entitlement.
Claiming a vehicle:
You are entitled to a deduction if one of the following applies to you:
You are nomadic (travelling) or have to carry cumbersome gear for work, trying to keep this as short as possible and to the point. You cannot claim many deductions if you are travelling and looking for work on the road, you need to plan ahead and keep good records as you move from job to job. You have to prove you have work to move to the next place. You can get in big trouble for telling porkies to the tax man so do your own research and do it right.
“Example: Matt is a fruit picker who has contracts with various farmers and therefore travels on a network of jobs. When he finishes work at a farm, he travels directly to the next. Matts work is considered itinerant because:
travel is a fundamental part of his work;
his work structure displays a “network” of places of work; and
Matt continually moves from one place of work to another before returning home.”
It should be safe to assume that the ATO accepts Matts travelling expenses are tax deductible whether he is employed or self-employed because it is the nature of his movements for work that makes it tax deductible.
Claiming meals and accommodation:
Where the activities by which income is gained travelling or staying away from home so that the travelling expenses are an allowable income tax deduction, the expenses of travelling include the cost of accommodation and meals away from home. This means that travelling between home and places work as they tour, would be entitled to deductions for the cost of lodgings and meals associated with that travel and while engaged in work.
As a practical general rule, where the period away does not exceed 21 days the allowance will be treated as a travelling allowance rather than a living-awayfrom-home allowance. For longer periods, it will be necessary to determine the nature of the allowance with guidance provided by this Ruling. Again talk to a good tax agent, don’t take my word and do it right.
The questions that make the difference to travel deductions and food are:
Do you frequently move from place to place?
What sort of accommodation do you use? , e.g. caravan, motel, long term accommodation;
Whether the taxpayer is accompanied by his or her family;
Whether the taxpayer is maintaining a home at the previous location while away.
Each person will have a different outcome depending on how you plan to work and travel.
Written proof must be kept for all accommodation and meals and this would include, site fees, cleaning and just about anything you do including a glass of wine with dinner but you have to keep records, and if you can’t get a receipt then log it in a dairy with some details to back up the claims unless it would be unreasonable for the ATO to expect a receipt
Written proof should be a record from the provider and include the name of the provider or supplier, the amount, a description of the goods or services, dated along with any other info you think would help your claims.
Given that you will travel for more than a week you must keep a travel diary. The diary must include all income earning activities. Records should be made before the job or work is finished. Record when the job started and ended.
Claiming a dependent spouse:
Thresholds and rates vary from year to year but as a rough guide if a dependent’s separate net income is under $7,000 a claim should be considered. As separate net income is usually lower than taxable income, while you may have a tax liability that can benefit from claiming your spouse as a dependent spouse, your spouse may also benefit from claiming you as a dependent spouse. Obviously, you can’t both claim for the same expenses, joint expenses will have to be shared.
Zones or Remote area offset
I like this one, working in remote areas can get you big deductions!
Remote areas are classed as either zone A or zone B. There are also special areas within these zones. If you do not know which zone your area is in, see tables 8, 9 and 10 on this Tax Office website page, link below.
To qualify for the tax offset, you must have lived or worked in a remote area (not necessarily continuously) for: 183 days or more during 2014–15, or 183 days or more during the period 1 July 2013 to 30 June 2015 (including at least one day in 2014–15) and you did not claim a zone tax offset in your 2014 tax return.
If you lived in a zone for less than 183 days in 2014–15, you may still be able to claim a tax offset as long as you lived in a zone for a continuous period of less than five years after 1 July 2009 and: you were unable to claim in the first year because you were there less than 183 days, and the total of the days you were there in the first year and in 2014–15 is 183 or more.
Primary producers who live in remote areas are also entitled to offsets:
For the up-to-date list of zones, click here for the Tax Office zone list. https://www.ato.gov.au/Calculators-and-tools/Australian-zone-list/
Rulings for Travelling Workers
If you sold a house and brought a caravan to travel in then you might miss out on many of the deductions as you don’t have a home base, so in this case the ATO sees you as having the caravan as a home so then you would be seen as not itinerant as now the caravan is your home There are ways around this without stretching the truth to much. This is why people use either the address of a parents or adult kids as their home address. If you don’t or can’t have an area setup with some personal affects and the like there then the ATO might say it is not a base or home and you miss out on many of the best deductions, so again this needs to be done right. Think about things like being on the electoral roll at your nominated home base locations, rego cars there, send mail there and more important you should visit the base when possible and log you were there down there as it is not worth missing out on claiming your motor vehicle expenses, food and accommodation for most of the year for the sake of not taking some time off at your home. (Again talk to a good tax agent to get the most you can)
Travelling Workers’ Main Residence Exemption
In order to be able to claim their food and accommodation traveling workers must have a home base.
118-110 – There must be a dwelling transferred with the land when it is sold for the main residence exemption to apply.
118-115 – A caravan can be a dwelling
118-135 – A dwelling becomes your main residence when you first move into it. If you move into it as soon as practical after purchasing it, it is your main residence from the date of purchase.
118-145 – You can exempt a dwelling as your main residence for up to 6 years after you move out and rent it out providing you are not using your exemption on any other dwelling. If you do not rent the property out or use it for any other income producing purpose then your main residence exemption can stay over the property indefinitely. Note you restart the 6 year period every time you move back in.
* How long you stay there * Where your immediate family lives
* If your personal belongings are there * Where your mail is delivered
* Whether you are on the electoral roll there * Phone and electricity are connected
* Whether your intention in being there was to make the place your home.
Note no time period is specified but around 3 months should be sufficient.
We hope this might help you with tax and travel, and once again always talk to a tax agent or accountant first.