By Shelley-ann Brinkley – 15 August 2014

Inland Revenue has issued a Questions we’ve been asked (13/05) which updates its view on the deductibility of a companion’s travel expenses.

The document replaces previous publications on the issue and applies for the 2014 and subsequent income years.

Historically, common practice has been to treat a portion of a companion’s travel expenses in relation to a business trip as a tax deductible expense.

Inland Revenue’s recent QWBA confirms that the Commissioner does not concur with this position.   Inland Revenue’s view is that in most cases, the travel expenses of a companion will not be tax deductible.  This is on the basis that the expenditure is likely to be private or domestic in nature.  Therefore, there has been a clear shift away from the historically accepted position.

Where the companion travels with the taxpayer primarily for the purpose of attending social functions, Inland Revenue has stated that the deductibility test will not be satisfied.  As such the companion’s travel expenses will not be deductible for tax purposes.

There are limited circumstances in which a companion’s travel expenses may be tax deductible as a business related expense.  Based on the Inland Revenue’s examples this will however apply to very few cases.  

The companion must have a certain level of skill or expertise in the taxpayer’s income-earning activity for the travel expenditure to be deductible.

This will be a significant change for some taxpayers who regularly travel on business.

For more details on the above, please contact our specialist tax team.

Shelley-ann Brinkley Associate – Tax Consulting
T +64 9 414 5444
E shelley-ann.brinkley@hayesknight.co.nz

Phil Barlow
Tax Director
T +64 9 414 5444
F +64 9 414 5001
E phil.barlow@hayesknight.co.nz