Australia Per diems

In Australia, employers can pay their employees per diems (i.e. daily allowances) as compensation for the expenses (such as maintenance, restaurants and hotels) incurred while they are on a business trip.

Per diems are not considered part of an employee’s income and are thus tax-free if they are following the ATO’s maximum amounts. These maximum amounts reflect what the ATO has determined as reasonable. These rates are reviewed at the start of each income year (1 July).

You can find all the rates applicable for domestic trips here. The rates depend on the destination and the salary of the employee. They are split into accommodation, meals and incidentals.

The reasonable amount for accommodation applies only for short stays in commercial establishments like hotels, motels and serviced apartments. If a different type of accommodation is used (for example, a hostel or caravan park), a reasonable amount cannot be used even if you receive an allowance.

The reasonable amount for meals depends on the period and time of travel. The amounts only apply to meals (breakfast, lunch and dinner) that fall within the time of day from the commencement of your travel to the end of your travel that is covered by the allowance.

For example, if you leave at 10:00 AM on Monday and return home at 3:00 PM on Tuesday, you can apply the reasonable amounts for lunch and dinner on Monday and breakfast and lunch on Tuesday.

The reasonable amount for incidentals applies in full to each day of travel covered by the allowance, without the need to apportion for any part-day travel on the first and last day.

The reasonable amounts described in this article do not apply to employee truck drivers, office holders covered by the Remuneration Tribunal and Federal Members of Parliament. You can find more information about this on ATO’s Tax Determinations.

The ATO’s Tax determinations also provide examples of calculation of reasonable amounts.

Reasonable amounts

You can find all the rates applicable for international trips here. The rates depend on the destination and the salary of the employee. They are split into meals and incidentals.

Reasonable amounts for overseas travel expenses – the employee’s annual salary is 133,450 AUD and below.

Reasonable amounts for overseas travel expenses – the employee’s annual salary is 133,451 to 237,520 AUD

Reasonable amounts for overseas travel expenses – the employee’s annual salary is 237,521 AUD and above

Destination countries are divided into six different cost groups. These different cost groups have different reasonable amounts. You can check to which cost group a country belongs here. If you travel to 2 or more countries on the same day, use the cost group of the country that is in the higher cost group in determining the reasonable amount for that day.

The reasonable amount for incidentals applies in full to each day of travel covered by the allowance, without the need to apportion for any part-day travel on the first and last day.

Substantiation

Expenses for accommodation during an international business trip must be fully substantiated. This means you need to provide documentation to prove the reimbursed amount corresponds with the actual incurred expenses.

If an international business trip lasts for more than 6 nights in a row, you must keep travel records to substantiate your expenses, even if you rely on reasonable amounts.