Understanding Travel as a Small Company

I have a company setup with two directors, spouses, and trying to get my head around a travel claim we'll likely have in the near future to launch a product.

I have read:

Claiming travel expenses as a small business

Overnight business travel expenses | Australian Taxation Office

https://www.ato.gov.au/law/view/document?docid=TXD/TD201419/NAT/ATO/00001&PiT=99991231235958

I will be double checking with my accountant, but would like to confirm I have a reasonable understanding first.

Summary:

- Trip would be linked to earning income (trying to attract subscribers to a web platform), topical conference, we'd be presenting, networking & likely have some meetings with others in industry
- Both directors required, one has knowledge of field, other of technology for platform (product)
- International travel & would like to mix some personal travel with business

If the conference was 3 days & we wished to add 3 days personal travel:

- We could put the entire cost of flights on the company card/account as a claimable expense?
- We could put the cost of accommodation & meals (up to the limit) on the company card/account for the portion of the trip which is business related?
- All costs incurred during personal travel period (accommodation and meals) would be purchased separately from personal funds.
- Fringe benefits wouldn't be reportable (on personal tax returns) if the cost of 50% of flights (portion of trip attributed to personal travel) was less than $2000 each (and no other FB received during the year)?

Am I on the right track here? Any common pitfalls to be wary of?

 

Forgive me as I'm no accountant but I would expect you can only claim 50% of the flights as half of the trip is personal.

 

Another side issue - why 2 directors?

 

They've gotta hold each other's hand?

 

My understanding from reading the article is that the entire flight cost would be deductible, but the personal portion would be a fringe benefit (but of no consequence as would be under reportable limits). But I may be wrong, hence why I asked the question.

Do you mean why both would need to travel?

The product is completely web based and aimed at a specialised field which isn't known for it's use of technology. One director is employed in the specialised field & not technology literate. The other is technology literate, designed the platform, guided it's development and understands the technology it was built on. In the process of presenting at the conference, question time, networking and meetings questions will arise about technical aspects of the platform in it's current state, about security, about what is possible for expanding functionality and also questions about how it will be used in the specialised field, results from a pilot and so forth. Two very different aspects to the platform to be covered by the two directors who have different contributions to the company and knowledge.

Also as @Scott No Mates highlighted, there will be hand holding

 

I understand not wanting two directors that are spouses in case the company fails/bankruptcy issues etc but if it was just a company running a part time business with no loans/no intention of getting loans. Wouldn't it be beneficial to have the two spouses as directors? Sorry to OP for sidetracking the post

 

I was thinking asset protection. If the ship goes down you would have no one to row the life boat.

There may be legitimate reasons to have 2 directors, but it just exposes everyone. I had a client company that operated a family video rental business. All gave personal guarantees without thinking. When the video rental industry died they were all chased for the guarantees.

 

Depends. What sort of contracts is the company entering into, are there personal guarantees with clients, advertising, leasing etc. What about ATO liability of directors. OHS liability of directors etc.

I did have one client who explained her need to be a director. Her husband had the licence so he needed to be director, but she need to be director so as to control the husband and the funds of the company.

 

I can't foresee any need for personal guarantees in the future (or loans other than those we are personally making to fund the start-up), there are no contracts outside of very basic online based costs, hosting, freelancers, etc. I presume should that change in the future we could retire a director?

Wouldn't the very nature of this thread be a reason to have both as directors (travel costs)? If only one of us was director would there still be another way to fund the expenses of and bring the other shareholder?

 

How many directors etc is a personal decision for you to make, but on the tax side there are directors and then there are employees. The company should be able to claim a deduction for expenses associated with the production of its assessable income.

Shareholders are different still. Their income relates to dividends and they cannot claim any expenses associated with the company.

 

I did speak with our accountant when setting up about one of us being paid as an employee, but by the sounds of it would be more complex, more paperwork, need to pay super, etc. Not something I wanted to setup before we even know if this is going to get off the ground.

If anyone has any insights around the questions in the original post it would be helpful

 

Yes valid points.

Travel is deductible where it relates to the production of income -after business has started. The wording in s8-1 says 'necessarily incurred'. You must apportion the business and private use. Keep records such as a diary and receipts etc.

 

This trip will technically be around 4-5 months after I expect business will have started (so I use the word 'to launch' very loosely).

Any accommodation and meals will be easy to keep records of (will keep receipts) and separate from personal expenditure. The cost I am most uncertain about is the flights. From what I've read it seems I charge them as a company expense & only apportion a % as a fringe benefit?

 

Who's going to take care of business while you're both away?

 

That's the beauty of an online only business

 

Better sack your accountant - even directors need to pay super. Working out if you have to pay super | Australian Taxation Office

I think Terry is certainly pushing a key point - can't see too many benefits vs. the increased risks.

 

I think you are misunderstanding the situation.

We will be paying out profits as dividends to the shareholders, not directors fees.

AFAIK that will not require super to be paid. If it does then maybe I need to revisit the accountant.

So many replies and yet still no real answer to my original questions lol.

 

That still does not require two directors - paying via a dividend stream is related to the shareholders ownership, not directorships.

No super (or payroll tax/workers comp) on dividends.

 

I never said it did. The only reason I've given in the thread for having two directors was so that travel costs for both were covered...

 

The travel thing is interesting. In Shanghai at the moment, Monday had clients in a private room at a exclusive hotel, forked out $1200, problem is the place does not take credit card - and will NOT issue a receipt. Believe me I was pushing for the receipt - anything - I got nada.

Anyone got any ideas how to prove this expense (apart from the wonderful pictures of the Bund and the event?)

Cheers, Ivan