The countdown for Australia’s biggest pharmacy conference, APP, is just around the corner. I have been honoured to attend in past years’ and have always enjoyed meeting others who are passionate about all thing’s pharmacy. Plus, there is the learning and updating myself with the pharmacy landscape so I can come back home and share this knowledge. Seminars, conferences, workshops and training for employees and owners are important to career development. It allows you to learn and upskill yourselves to do a better job, provide a better service and open doors to opportunities.
As an accountant thinking about conferences, my mind immediately switches to tax mode and what is claimable as a deduction. Sorry, I can’t help it! When you think of conference costs, you are probably thinking of course you can use these costs as a tax deduction. I like your thinking however there are some circumstances where these costs may not be 100% tax deductible. Here is a rundown I tell conference goers:
What makes the costs relating to seminars, conferences, workshops or training courses deductible?
A deduction can be claimed attending this event if it allows you to maintain or upskill your knowledge and skills to earn income in your current employment or grow your business.
What are the most common expenses that are claimed?
The three most common expenses include the following:
1. Cost to register.
2. Travel to attend the venue unless it is held at your normal workplace. Examples include various transport modes from flights, train fares, car hire (tolls, parking fees and fuel) and uber/taxi rides.
3. Accommodation and meals if you are required to travel away from home.
Can I claim the entire deduction even if there is a portion that is private in nature?
It depends on the circumstance. Usually where the expense is private in nature, this portion is not deductible. There are some examples where you can still claim the entire deduction and it will come down to the purpose of your trip. A common question I will ask a client is whether this is a work trip or is this trip personal in nature. Depending on your answer, you could claim the full deduction including all 3 elements as mentioned in the most common expenses claimed.
Example 1 – Work Trip
Attending a 5 day conference however spending an extra day to attend social activities organised by conference organisers. Most likely you can claim a deduction for all costs for the 3 common expenses.
Example 2 – Personal Trip
While holidaying interstate, an interesting training course catches your eye and you register to attend. This will now make my trip tax deductible right?! Unfortunately the original purpose was private in nature and therefore the costs relating to travel, accommodation and meals will not be deductible; only the training course will be.
Example 3 – Dual Trip
You decide to take the family way with you to a conference and tackle on a holiday afterwards. In this instance the purpose of the trip was outlined when planning this trip. You will need to apportion your conference expenses based on the percentage that you actually attended the conference and those days only. Other family member costs are also personal in nature and cannot be claimed.
Are there any limitations on how much I can spend and claim as a deduction?
Now that you know the 3 main common expenses, you’re probably thinking, “Well if it means all these expenses are eligible for a tax deductible, I might splurge out and treat myself and/or my employees”. Common items I see are business class flights, luxury hotels, fancy meals at a fine dining restaurant and a night out drinking of entertainment. So let me clarify the tax deductibility of these common items that are always asked:
· Business class flights – Yes this can be claimed as a deduction. The ATO cannot be determine how much you spend on your business however they will review the reason why you had to travel.
· Travel insurance – Although you might have purchased this for work-related trips, the ATO deems this non-deductible as it relates to personal items such as lost baggage, illness and theft.
· Accommodation – Similar to the business flights, the ATO cannot decide how much you spend is appropriate, only the tax consequences of why you spent it. So, you will need to consider the purpose of booking that accommodation and if any portion of this was personal in nature.
· Fancy Dinners – The ATO publishes each year what they deem is a reasonable allowance when it comes to meals and travel expenses. The publications for the 2023-24 year are:
- TD 2023/3 Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2023–24 income year.
- TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance
Meals consumed while at a conference is regarded more as sustenance and not in the nature as a meal entertainment however the intent of the meal and drinks should be considered. If it is private in nature, the deduction will not be allowable. Also, the cost of the meal and frequency of providing expensive meals should be considered. If you go out for an expensive meal that incurs more than $300 GST inclusive per employee, you could be subjecting yourself to Fringe Benefits Tax (FBT).
Where you spend more than what the ATO deems appropriate, it may not necessarily mean it cannot be deductible. You will need to maintain records and determine if any of these expenses were private in nature as entertainment and/or if FBT applies. The ATO does not determine how much you spend however they will review for the tax consequence on why you spent it.
· Entertainment – You decide to make a night out of it and go out for drinks and a show. This is personal in nature and not tax deductible.
· Costs Related to bringing a partner, friends and family – No, this is personal in nature so the tax deduction will not be allowed and you will need to apportion certain expenses that were not work-related in nature.
With that said, it is up to you how much you choose to spend although I will also say keep in mind that you should also not spend money for the sake of it to claim a deduction.
As an employee pharmacist and pharmacy assistant, can I also claim these deductions?
Costs related to seminars, conferences, workshops and training courses that you have paid for may be deductible depending on the situation. The most common situations:
· Costs are paid by your employer – No, this cannot be deducted as you have not incurred the cost. These costs however will be deductible by your employer.
· Costs are reimbursed – Also a no. You cannot claim a deduction as you have been reimbursed by your employer or someone else so therefore. Now that the cost has been incurred by the employer, they will now receive the deduction.
· Receive a travel allowance – The employer should process this allowance in their payroll system. This will then be included as income when you do your personal tax return. You can then claim the relevant costs related to this however record keeping is a must to determine what you can claim.
A Note for Employers: You will need to consider the reasonable travel and meal allowances that the ATO deems reasonable. This is mentioned above.
Do I need to keep a record?
If there is a deduction to be claimed, a record must be kept. It’s not just the receipts and invoices but you may need to maintain a travel diary. This travel diary needs to maintain records of:
- The nature of the activity/event.
- The date and time of work/business related activities.
- The length of time these activities occurred.
- The name and place where the activities occurred.
It is often hard to recollect what happened on your work trip so be diligent in writing it down. The more details you record, the easier it is for your accountant to advise you on the deductibility of these expenses.
Here at Peak, we encourage our team to attend conferences. Priya and Patty will be flying the flag this year to attend APP 2024 to network and get the latest updates in the industry. If you would like to get in touch, please don’t hesitate to reach out to them