What’s emerging? ATO guidance on travel costs finalised
The finalised guidance means greater taxpayer certainty around travel plans
- 12 August 2021
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On 11 August 2021, the Australian Taxation Office (ATO) finalised TR 2021/4 (public ruling addressing deductibility of travel accommodation/meals and the determination of travel on work vs living at a location) and PCG 2021/3 (practical compliance guideline to determine if employee benefits/allowances relate to travel on work vs living at a location).
Although both of these finalise previous draft iterations on the issue, there are a number of important clarifications and differences that have arisen through the consultation process. Some of the key items to be aware of are:
- TR 2021/4 reiterates that overnight stay is a mandatory requirement for deductible accommodation, food and drink expenses.
- Clarification is also provided in TR 2021/4 that family accompaniment does not default to a living at a location conclusion.
- TR 2021/4 also addresses extensions and curtailing of planned travel periods, noting that these may change the outcome from travelling on work to living at a location and vice-versa. The ATO has also included an example in this regard.
- PCG 2021/3 has clarified the potential to reset the 21-day count for travel to other work locations, or travel back home.
- Additionally, PCG 2021/3 now also applies the 90-day threshold on a fringe benefit tax (FBT) year basis, effectively allowing for the reset each FBT year.
- The ATO has also provided some detail in PCG 2021/3 relating to the types of records that can be maintained by employers to support the various criteria if relying on the practical guideline for employee travel.
Importantly, the ATO has re-emphasised through the consultation process that the PCG criteria does not represent a “bright line” test where, for example, travel for more than 21 days is now regarded as living at the location in all circumstances. Rather, it is a “safe harbour” guideline that employers can choose to rely on in making determinations regarding travel vs living.
Now that this ruling and guidance is finalised, the ATO’s previously announced suite of public guidance on travel is now complete, including TR 2020/1 (public ruling addressing deductions for work expenses) and TR 2021/1 (public ruling addressing deductibility for transport expenses). Where benefits provided to employees include transport, in addition to accommodation and meals, the full suite of guidance will need to be considered by an employer in assessing the FBT implications.
Relevantly, both TR 2021/4 and PCG 2021/3 apply both before and after the date of issue, subject to conflicts with existing settlement terms, and with the ATO having regard to previous public guidance when deciding whether to apply compliance resources.
For employers, the finalised guidance now means greater taxpayer certainty, which should be referenced in developing and assessing benefits for any travel programs and projects currently, or proposed to be, on foot. Additionally, where PCG 2021/3 is to be relied on, it is paramount that employers consider records and other corroborating infrastructure required to support reliance.
