If you’re self-employed and travel for work then claiming travel expenses is a must. You can claim for lots of daily expenses when you’re travelling for work and the amounts can add up quickly and substantially reduce your tax bill. Putting in place a simple system for claiming travel expenses can make the whole process feel effortless.
Below you’ll find all the information you need about which travel expenses you can claim, any specific rules you need to know and how to include the expenses in your tax returns.
We’ve put together this practical guide specifically for self-employed kiwis – based on the offical New Zealand tax guides (used by accountants) and the latest information from IRD – to help you claim travel expenses with confidence.
Which travel expenses can you claim?
Below are the common travel expenses you can claim for national or international work travel. For a complete list of all self-employed expenses, check out our personal tax deductible expenses article.
If the purpose of the trip is to buy business assets, travel expenses are usually treated as part of the cost of the asset and can’t be claimed as an expense. To be considered a business asset it should be valued at more than $1,000 and have a useful life in your business of more than one year.
National work travel expenses
You can claim lots of your daily expenses when you’re travelling around New Zealand for work. If you take a holiday as part of the same trip, you can only claim for the parts of the trip that were work-related.
Domestic Flights – Domestic flights for a work related trip.
Accomodation – Accomodation costs while travelling for business. If you’re travelling for a work-related meeting, conference or training course that requires an overnight stay, you can claim the cost of accommodation. E.g hotel, motel or Airbnb.
Transport – Transport costs such as a taxi or rental car while on a work trip. Travel between your home and place of work is not claimable.
Travel Food & Drink – If the meal or function involves an existing or potential business contact as a guest then 50% of the expense can be claimable. General food and drink while travelling cannot be claimed.
International work travel expenses
When it comes to travelling internationally and claiming business expenses, your overseas expenses will not included GST. Apart from travel insurance which is usually purchased within New Zealand before you leave the country.
If the main purpose of your trip is business but you take a free half-day to enjoy exploring a new city, the personal part of the trip is doesn’t count. You can still claim all your travel expenses.
If the main purpose of your trip is a holiday but you happen to meet up with a couple of business contacts while you’re there, the business part of the trip is incidental to the holiday. You can’t claim any of your travel expenses.
When combining a business trip with a holiday, you must split out your expenses and only claim the portion that relates to the working part of the trip. A good way to do this is to keep an itinerary or diary of your trip with enough information to calculate all your costs and make a reasonable split between business and personal expenses.
International Flights – International flights for an overseas business trip. Does not include GST.
Overseas Accommodation – Accomodation costs while on an overseas business trip. Does not include GST.
Overseas Transport – Transport costs while on an overseas business trip. Does not include GST.
Overseas Entertainment & Recreation – Entertaining current or potential clients, staff or suppliers overseas. Does not include GST and is 50% claimable.
Travel Insurance – Travel insurance for an overseas business trip.
How to calculate the GST on expenses
If you’re GST registered the GST content on travel expenses can be claimed as they’re paid, in each GST return period, or at the end of your tax year.
When working out GST on an expense you first need to seperate the GST amount from the expense amount. Here’s Inland Revenue’s recommended formula to find the GST amount from a GST inclusive price – GST Inclusive Price x 3 ÷ 23 = GST Amount.
E.g. if the cost of a meal with a client while travelling on business is $150 then the GST amount is $19.57 and the GST exclusive amount is $130.43.
You then need to apply the 50% rule to both the GST amount and the GST exclusive amount to get the claimable portion.
Eg. for you client dinner the GST claimable portion will be $19.57 x 50% = $9.79. And the income tax claimable portion is $130.43 x 50% = $65.22.
Be sure to claim the GST portion of the expense only in your GST return and not in your income tax return as well.
How to include travel expenses in your tax return
When the time comes for actually claiming travel expenses in your tax returns, here’s what you need to do. If you’re self-employed and registered for GST you will need to file GST returns throughout the year and an Income tax return (IR3), with a Financial Statement (IR10), at the end of the year. The following instructions relate to online returns which can be accessed through your myIR account.
Add up the claimable GST portion of your travel expenses for the return period. Combine this amount with any GST you’ve paid on other expenses during the same period. Add the total to the ‘Total GST paid’ box in your online return.
Income tax return (IR3)
If you earn self-employed income – subtract your travel expenses (along with any other expenses) from your total self-employed income to get your self-employed net income. Enter this figure in the ‘Self-employed net income’ box on the income page of your online return.
E.g. if you have $61,000 self-employed income for the year, your travel expenses are $2,500 and you have $5,000 of other expenses for the year then 61,000 – 2,500 – 5,000 = $53,500 self-employed net income.
If you earn schedular payments – total up your travel expenses (along with any other expenses for the year) and enter this figure in the ‘Expenses related to schedular payments’ box on the income page of your online return. If you earn both schedular payments and self-employed income make sure you only claim your expenses for one type of income.
Financial Statement (IR10)
The IR10 Financial Statement is part of your income tax return and is required for statistical purposes. The figures you enter in the IR10 will not effect how much tax you pay. Enter all your expenses for the year, including your travel expenses, into the relevant boxes. Travel expenses should go into the ‘Other expenses’ box.
Keep detailed records if you’re travelling on business. Especially if you’re also taking a holiday at the same time. Like you do for any other business expenses you are claiming, you need to keep invoices and other records for your travel expenses. You don’t need to include the receipts with your tax return, but will need them on hand if IRD asks for proof.
Records of travel expenses should include:
- invoices, receipts and tickets
- bank statements for your business related accounts
- reasons for the trip
- date of the trip
- your itinerary or travel diary – with notes on time spent on business and personal activities
You need to keep these records for at least 7 years. Records must be in English or Māori.
Claiming travel expenses with Solo
Claiming travel expenses in Solo is simple. Just select a category for your transactions and all the tax rules and math get done for you. Solo connects directly to your bank account so you don’t have to enter any transactions. Solo even shows you how much income tax, GST and ACC you owe at any moment throughout the year and gives you all the information you need to file your tax returns.
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