A visit to your accountant is tax deductible, the ATO agrees in TD 2017/8. It's an added bonus if your accountant is located in one of the most beautiful beach towns in Australia.
How is travelling for your tax return tax deductible?
Tax agent's fees were already tax deductible. The ATO issued its Tax Determination TD 2017/8 last year to provide clarity on associated travel costs. If you visit your accountant the costs of travelling are tax deductible under section 25-5 Income Tax Assessment Act 1997, provided your tax return is prepared by a ‘recognised tax adviser’ (i.e., a Registered Tax Agent).
What if you enjoy a holiday as well?
Doing your tax is not meant to be fun. So travelling to do your tax shouldn't be either, you might assume. However, the ATO's Tax Determination does not say where you can go or how many times a year. It does, however, consider how much time you spend there and the overall purpose of your trip.
So if you have a bit of a holiday on the same visit, your total expenditure must be apportioned. The Tax Determination includes some examples of this, which we have copied below.
We've considered some interesting scenarios with some of our clients from afar, including the costs of extended stays caused by flooding. Others may need to stay for longer to work with us and our bookkeeper to get multiple years of overdue tax returns up to date or to attend further planning meetings.
Example 1: sole purpose of travel: from Tax Determination TD 2017/8
Maisie and John are partners who carry on a business of sheep farming on a station near Broken Hill. Every year they travel to Adelaide for the sole purpose of meeting with their tax agent to finalise preparation of their partnership return.
They stay overnight at a hotel, meet with their tax agent the next day and fly back to Broken Hill that night. The full cost of their trip, including taxi fares, meals, accommodation and travel insurance, is deductible.
Example 2: apportionment when travel is equally for managing tax affairs and private purposes
Julian is a sole trader who carries on an art gallery business in Oatlands. He travels to Hobart for two days to attend a friend’s birthday party and to meet his tax agent to prepare his tax return. He stays one night at a hotel.
Because the travel was undertaken equally for the preparation of his tax return and a private purpose, Julian must reasonably apportion these costs. In the circumstances, it is reasonable that half of the total costs of travelling to Hobart, accommodation, meals, and any other incidental costs are deductible.
Example 3: apportionment when travel is incidental to main private purpose
Erin is an employee working in Warragul. She has her tax return prepared by a tax agent in Melbourne. When travelling to Melbourne for a week long football training camp, she decides to stay an extra night in a hotel to visit her tax agent the following day. She travels back to Warragul after the meeting.
As Erin’s trip is mainly for private purposes, and visiting the tax agent is incidental to that main purpose, she must reasonably apportion the costs.
In the circumstances, it is reasonable that only the direct costs of her accommodation for the extra night, incidental costs associated with this time, and the taxi fares from the hotel to her tax agent’s premises and back to the hotel are deductible.
We can answer any of your questions regarding this TD. We can also apply for a private ruling from the ATO to 'test drive' any claims before lodging your tax return, if we come across any grey areas.