FBT - Mixed Private and Business Travel
This page deals with the tax consequences of staff mixing business with personal travel and its impact on flight costs. We recommend you visit the University Travel page for more information on UniSA travel policy and guidelines, as well as travel insurance information.
UniSA practice is to require staff to reimburse the University for any portion of any expense that would attract FBT if the University were to pay for it. In relation to travel, this means that staff will be required to contribute or reimburse UniSA for a portion of flight costs that are deemed to be private in nature.
If the staff member does not contribute or otherwise cover this private portion, then the relevant cost centre will bear an additional cost on account of FBT. FBT will increase the cost of the private portion of domestic flights by 96% and international flights by 87%.
FBT & Travel - Basics
Whenever the University pays for flights, meals and accommodation for a staff member, UniSA has provided a fringe benefit - regardless of the purpose. Where travel is predominantly business related - UniSA can reduce the taxable value of the benefit, and in doing so, reduce the FBT cost to zero.
Where private travel is more than merely incidental, the trip is no longer predominantly business related, and a portion of the flight costs will be subject to FBT. This will increase the cost to the Uni by 87% for international and 96% for domestic travel. As a result, the Uni will require the staff member to reimburse the Uni for any private portion.
To reduce the FBT, it is necessary to:
- Substantiate any staff travel the Uni pays or reimburses for by way of a Travel Diary where the traveller is away from home for 6 nights or more. In the absence of a travel diary, all travel and other related costs are considered to be private (under the legislation), and FBT will be imposed on the full travel costs (flights, accommodation, meals).
- Distinguish between private and business time on travel away.
- Have a procedure or policy in place for determining when private travel becomes more than incidental and where the traveller is required to cover the personal component of the travel. The Universities approach is documented below.
Where possible, these steps are done prior to approval of the travel. Not only does this ensure that the University is correctly managing its FBT compliance, but it also provides the cost centre manager with all the necessary details and information of a travellers trip, to facilitate budgetary decision making.
Travel Diaries - the FS37
As stated above, travel diaries are required whenever the traveller is away from home for 6 nights or more, otherwise all related costs will be subject to FBT. Please follow this link for more information on travel diary requirements.
When is travel subject to FBT?
Travel by a staff member will be subject to FBT when the number of Private Days equals or exceeds the number of Business Days. This means that you need to determine the total number of Business Days and Private Days and do a comparison. If on this analysis FBT would apply to the trip, the staff member will be required to reimburse the University for at least 50% of the flight costs.
What is a Business Day?
University business is defined in the travel guidelines as:
- University representation (e.g. member of the AVCC, ATN meetings);
- Overseas and regional program delivery;
- Administration (e.g. appointment process, external reviews, setting up collaborative arrangements);
- International marketing and recruitment activities;
- Research interactions; and Conferences/PEP/Graduations.
It is appropriate to also include unavoidable time spent between business activities:
- Weekends & public holidays (generally where occurring between two business days only);
- Days only spent in a location due to flight times and availability;
- Days only spent in a location due to practicalities (i.e. business days on Monday and Wednesday, it is impractical to return the staff member on the Tuesday);
- Required rest and/or recovery days for long flights (subject to specific approval).
In determining whether a day is unavoidable time, it is often reasonable to ask would UniSA be happy to pay for the staff member's accommodation on this day? (this is not always determinative, but is a useful starting point).
What is a Private Day?
All other travel is by definition private.
What about days in transit to a location?
Transit days are days in which you are actively travelling from one location to another. Transit days may be Business or Private. Note that any Transit days in which a business activity also occurs should be classified as Business Transit (i.e. if you travel to Sydney, and have a meeting on the same day, this is clearly a business day).
If travelling to or from a location where no business activity occurs at all (i.e. for a purely private purpose) this is a Private Transit day - this includes a stop off on the way to a business location where that stop off is not required for business reasons. Otherwise most transit days will normally be business days.
When does FBT apply?
The University applies the following principles:
- If Private days are less than Business days, No FBT. This is because the private purpose is are merely incidental to the business purpose. For example, if I have a conference for 4 days, and I spend three days on private leaves, there is no FBT consequence, and I do not need to reimburse the University for any of the flight costs.
- If Private days are equal or greater than Business days, then the private travel is more than merely incidental. At this stage, the Business purpose and the Private purpose have equal weight. A 50% reimbursement of flight costs is required from the staff member. If the staff member does not reimburse FBT will be payable on the 50% private portion.
- If Private Days are double the number of Business Days (or greater), then travel is the dominant purpose. The amount of staff reimbursement is calculated on a proportionate basis. If no reimbursement, then the proportionate private amount will be subject to FBT. For example, a traveller books a trip to London for 5 days business, and 12 days private. The staff member must reimburse 12/17 or 71% of the flight costs. If the staff member does not reimburse, then the Uni will be subject to FBT on the 71% private component, which will be charged back to the cost centre.
Note that staff will generally always be required to pay for any wholly private costs, for example:
- Any other person's travel expenses, unless that other person is also an employee of the University and is undertaking University business and is required to be in the same location. Please note an approval is required for certain accompanied travel, and there are insurance coverage limitations also. Please refer to the University Travel page for more information.
- Diversions, individual legs of travel and side trips undertaken for a solely private purpose. Please note this also includes any incidental costs incurred in making changes to a travellers existing booking or itinerary.
Examples:
Example one:
- Travel from Adelaide to London for conference 5 days ($2000 return)
- Private trip to Paris visiting family for 15 days ($100 return to London)
- Return to Adelaide via London
In this example, Private days exceed twice Business days. The staff member should reimburse three-quarters of the cost of the trip or $1,400.
Example two:
- Travel to UK for lecturing purposes 15 days business ($2000 return)
- At end of lecture schedule, a diversion for 5 days in Spain (diversion costs additional $400)
- Return to Adelaide
As diversion to Spain is entirely private, the additional $400 must be reimbursed.
What if I have questions?
Please contact Kristian Thoroughgood in the first instance or call x 21922.