A bona fide travel allowance is a travel allowance paid to an employee who is required to travel overnight for work purposes where the amount paid covers the employee’s travel expenses for the trip. The employee is required to include the travel allowance in their tax return as income.

Employees traveling on work and away from home overnight are entitled to a deduction for accommodation, meals, and incidental expenses incurred (subject to having the necessary receipts and travel diary). Expenses incurred but not supported by the relevant receipts will be non-deductible.

In contrast, employees in receipt of a bona fide travel allowance will not be required to have receipts to substantiate their expenditure if:

• The employee is paid a bona fide travel allowance to cover the cost of food, drink and accommodation.

• The travel allowance is paid to cover a specific trip undertaken for overnight work travel.

• The amount claimed by the employee does not exceed the relevant reasonable allowance amount as prescribed by the ATO in TD 2014/19.

The reasonable allowance amounts prescribed in TD 2014/19 are quite high. For example, an employee travelling overnight to Perth in 2015 on a salary of under $112,610 would be entitled to a deduction of $354 per night. Even though the substantiation requirements don’t apply to a bona fide travel allowance, the employee can only claim a deduction for the expenditure they actually incurred, not just a standard $354 per night for example. This means that if the employee travelling to Perth overnight stays with a relative for free they should be claiming $0 as a deduction.

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