I recently gave a tech presentation in Bangkok to a group of family business members. And while the materials and discussions afterwards were enlightening, I eagerly wanted to see some of this great city.
A group of us went to Skybar. It was incredible. The view was amazing. The people (except me, of course) were dead, wonderful, and the atmosphere electric. I had one night in this city and wanted to really experience it.
Guys with me were also present at my seminar. The conversation was bypassed, but inevitably returned to the way our work tried to influence families bordering abroad – and Asia in particular.
Then it was time to buy a drink for the group.
The beer cost AUD $ 25.
And there were 16 of us.
Anyway. I tucked it in and bought a round. At no stage could I make a runner on the group. First, it's not cool, and second, it would be a kiss of death for any young man.
But the question hangs. Is it fair that I charged these costs to my business? How do you make sure everyone is equal? How do you balance the needs of different owners? Can I get a tax deduction? And how do you keep receipts for all this stuff?
Please enter a term for travel allowance. These things basically take away the need to keep your bills while traveling, so tax time comes when your life for managing a family business is a lot easier.
So what is a travel allowance?
It is a payment to cover expenses while an employee is traveling outside the home for work. Travel allowance usually covers the cost of meals, incidental stay and accommodation in Australia, but only the cost of meals and incidentals while abroad – and should not be supported by tax invoices.
You can pay the travel allowance to any employee even if he or she is not getting paid. This is important in a family business, as family members are often employed by directors but do not receive a flat pay PAYGW.
What is the travel fee?
Each year, the tax office issues guidelines on how much the allowance can be for a person. Current add-on rates are on TD 2016/13 and most people find the rates relatively generous.
And the rates have been spaced out to allow different degrees of seniority at the family business to be identified.
The main benefit
If you are paid bona fide during the trip, you can claim a tax deduction for the same amount without withholding proof of proof.
This is important. Most often, people, especially family members, will waive their tax deduction because it is simply "too difficult". Receipts will also be lost and receipts could be in another country, so they are borderline useless in understanding what you did some time back.
The word "bona fide" is important. You must incur expenses related to your trip.
So, if you have decided to stay at a friend's house in Sydney for free and have not paid for your trip, you cannot claim a travel allowance.
Another benefit of a travel allowance is that it provides a family member with a level of privacy. Sometimes in a family business, family details can get pretty involved. Mothers could watch every little thing and control might become more dense. So, if a family member has spent a little too much one night – it's good to know that the allowance simply covers the cost without "shaking off" with insincerity.
You have not been charged
Just because the tax office sets the maximum rate of travel allowance does not mean that you have to pay that amount to employees of your family business. This is the maximum rate. Your family business can choose how much staff will pay while traveling.
Of course, the words "bona fide" mean that the payout must be realistic, not tax fiction. Paying your staff $ 6 a day for lodging, food and taxi is not a blessing.
A travel tax does not stop your legal tax claim
Of course, there are many legitimate reasons why you made more during the trip than the amount specified by the Tax Office.
In this case, you simply add up the actual costs incurred while traveling and you claim this as a tax deduction – either in person or through your family business. The travel allowance for them is to mitigate income. It does not stop you from claiming legitimate expenses.
Do you travel?
Most often, the concept of travel is quite simple. However, where a person goes on an extended trip can become confusing – at what point does the person simply travel through the city as opposed to living in the city?
The tax office has a general directive that if you are away from home for less than 21 days – you will be traveling.
This guide is of course and varies depending on the facts. So, if you say, a country sales agent at a family business you may be out of the house for 6 months – but you only sleep two nights in one city.
Important – The concept of traveling among family members is sensitive. Petty jealousy can occur from family member to family member. Travel is often seen as a "convenience" to work in the family business by some and another task.
If you are dealing with a family business – write a family member and travel policy. Make it clear who can and can't and what the decision is based on. If this is really because they are family friendly – leave it at that. Also, if traveling people are doing it in a family business simply to make the family business great – articulate it clearly and talk about it among families.
Using family travel benefits creates a level playing field for everyone and makes it tax efficient. This can be significant for a family business with significantly more than a few extra dollars in tax deduction.