Deductibility of Overseas Travel Expenses
IRD issued a guidance of deductibility of overseas travel expense. The key point is here is the overseas travel could be a business and there must be a sufficient nexus with income.
- Costs are usually deductible in the income year they are incurred. However, where costs are prepaid, deductions may be spread over multiple income years. This applies to advance bookings for travel and accommodation over $14,000, or to bookings that are for more than six months after a taxpayer’s balance date.
- Apportionment; dual purpose. One way of apportioning overseas travel costs is an apportionment based on the number of days spent on business as a fraction of the total number of days spent on travel. This method was accepted as a reasonable method of apportionment on the facts considered in Case G5 (1985) 7 NZTC 1,011.
- Capital in nature: The capital limitation denies a deduction for costs to the extent to which they are of a capital nature
*The above article is a high-level explanation of the methods of calculation, and there may be other technicalities/rules that are applicable. The complexity of the calculations can also vary. Please reach out to us if you have specific questions regarding your situation.
Please note that the above does not constitute specific tax advice and only intends to be a general advice. If you require specific advice related to your situation, please reach out to our tax consultant using the ‘contact us’ option.
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