Money your company provides you to compensate for the expenses you could face while you go away from your house overnight to complete your business is known as an ATO Travel Allowance. Your income statement or payment summary could or might not display the travel allowance.
ATO Travel Allowance
Travel allowance is a payment paid to an employee to cover lodging, food, drink, or other expenditures they incur while they go away from their home overnight in the line of business.
Unless an exception exists, allowances folded into your employee’s pay or compensation are taxed as salary and wages and tax needs to be deducted. On your employee’s payment summary, you record the travel allowance amount in the allowance field.
Your company’s travel allowance has to fairly be anticipated to cover the expenses you would spend overnight on business. The travel allowance is what you get for travel including you staying overnight away from home to carry out your duties.
ATO Travel Allowance Rates 2024/25
Applied from 1 July 2024 to 30 June 2025, the ATO has revealed the newest pence per kilometer rate for business driving: $0.88 per km for the 2024-25 tax year. The ATO has raised the rate by 3 cents over the previous tax year.
| Tax Year | Cents Per Km Rate |
| 2024-25 | $0.88 Per kilometer |
| 2023-24 | $0.85 Per kilometer |
When changing the cents per kilometer rate, the ATO considers both fixed and variable running expenditures of a vehicle yearly. Australia has had unpredictable petrol prices throughout the second part of 2023 and at the beginning of 2024.
Still, several other expenses affect the rate as well: road taxes, insurance, maintenance expenses, and vehicle depreciation. Over the previous four years, the ATO has yearly raised the per-kilometer fee. The tax authority has raised the per kilometer rate by 3 cents, up to 88 cents per km, for the next tax year.
Set Up ATO Travel Allowances In Your Pay Runs
Many company owners find it difficult to manage the gamut of employee expenditures, from travel allowances and reported travel expenses to how to differentiate between the two, thus ensuring tax compliance at all times.
The accounting tools in QuickBooks provide a neat and fast approach to finishing these chores. Either as and when necessary or set up in the system, a travel allowance may show up in each pay run for certain workers automatically.
QuickBooks payroll systems allow staff members to easily see a breakdown of their payslips on demand, assure ATO compliance, and minimize a lot of work for businesses.
ATO Travel Allowance Eligibility
Those who fly for business might be qualified for the travel allowance. However, stringent regulations exist to guarantee that the allowance stays non-taxable and compliant with the law.
- The travel must be closely associated with professional obligations. This may need customer visits, conference attendance, or working outside the primary office.
- The travel must call for the employee to spend overnight at a distance from their usual home. Usually, day visits devoid of an overnight stay are not eligible for the travel allowance.
- The travel expenditures ought to be real and closely connected to the working activity of the employee. For instance, lodging, food, and incidentals that is, laundry, tips, etc. that arise during the travel might count.
- The ATO offers certain rules on what would be a “reasonable” travel allowance. These figures are updated often and change based on things like travel location and job duties or salary.
ATO’s Rules on Travel Allowances
Key ATO criteria regarding travel allowances are shown here:
- A travel allowance is a set sum of money a company gives to a worker to help with travel costs connected to their employment.
- Should a travel allowance satisfy the following criteria, the ATO treats it as tax-free.
- Part of the employee’s work responsibilities is travel.
- The trip is not for the employee’s personal or domestic needs; it entails an overnight stay away from her regular location of employment.
- If the employee’s travel allowance is insufficient, she may still qualify for a tax deduction if her expenses are directly associated with generating her income. The employee must demonstrate that the expenses were necessary for their work and provide receipts or other documentation, such as a travel log, to support the assertion.
- Employees may be required to reimburse any unutilized portion of the stipend and provide receipts for travel-related expenses incurred.