With June 30 fast approaching, H&R Block’s Director of Tax Communications, Mark Chapman, provides a breakdown of what truck drivers can and can’t claim.
There is a wide range of deductions you can claim as a truck driver, such as:
- Any costs associated with washing and repairing your truck.
- Any transport expenses (including parking fees and tolls) if you are driving between multiple job or work locations during the day, or getting a taxi to the depot because you’ve reached your maximum driving hours
- The cost of any medical examinations you need to take to fulfil any health assessment requirements to certify you’re fit to drive
- Meals when you’re travelling away from home overnight for work, and overtime meals when you are paid an overtime meal allowance under an industrial law, award or agreement
- Travel expenses such as accommodation, showers, sleeping bags/pillows and meals if you’re travelling for work and need to stay away from home overnight, and pay these expenses yourself
- The cost of buying, repairing and cleaning any clothing items (including footwear) that are protective in nature or part of a uniform and have distinctive features such as your business’s logo on them
- Self-education costs for attending any courses, training or seminars specifically related to your work (such as first aid certification or renewal)
- The cost of buying any notepads, logbooks, diaries and pens needed to record your route or schedule
- Sunhats, sunscreen and sunglasses (including prescription/anti-glare) if you’re required to work in the sun and need protection
- Phone and internet expenses for any work-related usage (such as checking in with the base) on your personal phone or device
- The cost of acquiring and looking after a working dog, but only if you’re carrying cattle or livestock and need the dog to herd them
What can’t I claim?
There are several key expenses you can’t claim, including:
- The cost of buying CDs, talking books, iPods, or any other entertainment devices, even if they are purchased to keep you awake during a long drive
- The purchase of seat covers, air fresheners or any other adornments to your vehicle
- The cost of renewing your driver’s licence, even if having it is a condition of driving your truck
- Any fines for speeding or parking that are incurred during your work day
- Accommodation expenses if these are covered by your employer or you sleep in your truck
- Any entertainment activities (such as going to the cinema, a gaming arcade or dinner) even if you’re travelling for work and sleeping away from home
- Regular clothing such as jeans, a t-shirt or running shoes, even if you only wear them to work
- The cost of any meals or snacks consumed during the course of a normal work day, even if you are given an allowance to cover the meal expense
What can truck drivers legally claim when it comes to overnight trips and meal allowances?
In order to claim a deduction for overnight trips and meal expenses, truck driver employees are required to substantiate all their expenses by providing written evidence (e.g. receipts) and/or by maintaining a travel diary (if relevant).
Written evidence includes:
- a receipt, invoice or similar document specifying the date, amount of expense, etc.
- where overseas or domestic travel involves being away for six or more nights in a row, a travel diary must be kept (i.e. showing the date, destination, purpose of trip, etc).
However, the exemption from keeping detailed substantiation may apply where the following conditions are met:
- The employee is paid a bona fide travel allowance to cover the cost of food, drink, accommodation and/or incidental travel
- The employee’s travel allowance is paid to cover the costs of meals, accommodation, and/or incidental expenses, for specific work-related trips.
- The employee spends no more than the Commissioner’s reasonable amount/
The Commissioner publishes reasonable amounts annually (for food and drink, accommodation for domestic travel only, and incidental travel expenses). Separate reasonable allowance amounts are also prescribed for food and drink expenses incurred by employee truck drivers who are travelling overnight for work-related purposes.
So, the basic rules for claiming the exemption from substantiation are”
Employees receive a bona fide travel allowance from their employer
In this situation, there are three possible outcomes:
- The driver incurs expenditure less than the Commissioner’s reasonable amount (set out in TD2024/3)
- The driver can claim a deduction for the amounts actually spent, not for the Commissioner’s reasonable amount.
- The driver can take advantage of the substantiation exception which relieves the driver from the requirement to keep written evidence.
- The driver incurs expenditure equal to the Commissioner’s reasonable amount:
- The driver can claim a deduction for the amount corresponding to the Commissioner’s reasonable amount.
- The driver can take advantage of the substantiation exception which relieves the driver from the requirement to keep written evidence.
- The driver incurs expenditure in excess of the Commissioner’s reasonable amount:
- The whole claim must be substantiated with written evidence, not just the excess over the reasonable amount.
- Where drivers have spent over the reasonable amount but do not have written evidence (which will often be the case), claims should be restricted to the Commissioner’s reasonable amount.
Employees do not receive a bona fide travel allowance from their employer:
In this situation, there is only one possible outcome:
- Irrespective of the amount claimed by the truck driver, the whole claim must be substantiated with written evidence.
What constitutes a bona fide allowance?
- It must be an amount that could reasonably cover accommodation, or meals or incidental expenses.
- Must be a genuine allowance (not paid as part of normal wages/salary)
- Must cover specific journeys
- Excludes fixed allowances (e.g. $2,000 per year)
- Excludes hourly allowances (e.g. set rate per hour for hours worked)
What does substantiation actually mean?
- Claimants must still show “the basis for determining the amount of their claim, that the amount was incurred and that it was for work-related purposes” such as:
- Bank and/or credit card statements showing cash withdrawals used to pay for work-related travel expenses.
- A letter from an employer or job description showing work-related travel as being required.
- Diary records confirming work-related travel and expenditure incurred.
- Copies of menus from restaurants/eateries regularly visited
What do truck drivers need to know about keeping a compliant logbook and how it affects their deductions?
Turck drivers are not required to keep a logbook for tax purposes. They are required to prove their “actual expenses” on their work-related journeys. You need to keep all receipts throughout the year to justify your claim, such as insurance, servicing and repairs. Petrol/diesel can be estimated using the start and end odometer readings for the year, indicating the total kilometres travelled. A reasonable estimate of fuel and oil expenses can be made by multiplying average fuel consumption for the truck by average fuel price (from the Australian Institute of Petroleum website). They also need to prove how many work-related kms they have done (out of the total). A logbook can be useful here but if they use the truck purely for work, a simple dairy of their work-related use can help.
Have there been any changes to fuel tax credits or vehicle depreciation rules this financial year that truckies should be aware of?
No.
What’s your advice to truck drivers trying to maximise their tax return without raising red flags with the ATO?
Check your paperwork
Take some time out to gather all the information you will need to help you prepare your tax returns, including invoices and receipts for work-related expenses and any bank/credit card statements that contain items of work-related expenses that you no longer have (or never had) receipts or invoices for.
If you’re not sure if it’s claimable, collect the receipt or invoice anyway and discuss it with your tax agent. If you don’t have the paperwork, you can’t claim a deduction so it makes sense to set aside this time in advance of the end of the financial year to spare yourself a stressful document hunt whilst you’re actually in the process of getting your return prepared!
In addition, if you’re claiming any expenses that have a work-related element and a private element (such as for the use of a personal mobile phone) set some time aside to work out what a reasonable apportionment is for the work-related bit.
Use a tax agent!
There’s a reason 70 per cent of Australians use a tax agent to prepare their tax return; tax is complicated! Get your tax return wrong and the comeback is on you, either with a lower refund or ATO penalties.
Most people find it far less stressful to simply pass on all their information to a tax agent and leave it to the agent to complete their return, safe in the knowledge that the return will be accurate and complete. An experienced agent will usually be good at sniffing out those obscure tax deductions you didn’t know you could claim so they can often pay for themselves several times over. Best of all, the tax agent’s fee is also tax deductible!