What Travel Expenses Are Deductible?

What Travel Expenses Can You Claim?

• Travel between business locations
• Overseas travel for business
• Travel to acquire business assets or equipment

However, travel between your home and your place of business is not deductible, unless your home is also your business base.

What Travel Expenses Can’t You Claim?

You cannot claim deductions for travel costs that are:

• Private or domestic in nature
• Capital expenses (except for travel to assess business assets)
• Related to earning exempt income or employment income

When to Claim Your Travel Expenses

Most travel expenses are deductible in the income year they’re incurred. However, if you prepay travel expenses that exceed $14,000 or are for travel starting more than six months after your balance date, you may need to spread these costs across multiple income years.

To make sure your travel expenses are well-documented, attach a memo detailing the nature of the trip and how it relates to your business to your receipts or invoices.

Travel and Capital Expenses

If your travel relates to acquiring a business asset (such as purchasing equipment), the expenses are usually considered capital expenses and added to the cost of the asset. However, travel for the purpose of studying or inspecting business assets may be deductible.

Overseas Travel Expenses

For overseas travel, costs are deductible as long as they directly relate to your business. Holiday expenses are not deductible, so ensure your records differentiate between business and personal travel.

To avoid complications, keep detailed documentation, including:

• A travel itinerary and diary
• Copies of business contacts or cards
• A record of firms visited and business conducted
• Notes on personal diversions from the business itinerary
• Receipts for all expenses
• For overseas meal costs, only the extra costs above what you would normally spend on meals (e.g., restaurant meals vs. home meals) are deductible.

Mixing Business with Holiday Travel

If your trip includes both business and personal purposes, you’ll need to apportion the expenses. Here’s how deductions generally work:

1. 100% Deduction: When the holiday portion is incidental to the business trip.
2. Apportionment: When the trip has distinct business and personal purposes.
3. No Deduction: When the business aspect is incidental to the holiday.

A common method is to apportion based on the number of days spent on business versus total days of travel. Inland Revenue may accept other methods if they reasonably reflect the proportion of business-related travel.

Travel with a Spouse or Family Member

If a spouse or family member accompanies you on a business trip, their travel expenses will generally not be deductible unless:

1. The companion has knowledge or expertise relevant to your business.
2. Their presence provides material support to your business operations.

If their role is limited to companionship or attending social events, their expenses are considered private and cannot be claimed.

For travel expenses incurred within New Zealand, the entertainment expense rules may apply.

Investor Travel Expenses

Investors may also be able to claim travel expenses if they can demonstrate a sufficient connection between the travel and the management or administration of their investments.

Our Recommendation

To avoid complications, it’s best to consider the tax implications of your business travel before embarking on the trip. Proper planning and documenting expenses will make it easier to claim deductions when you return.

 If you would like to know more about tax deductible expenses in general, check out our blog: What expenses are tax-deductible?.