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Mixing Business with Pleasure – Deductibility Of Companion's Travel Expenses

Mixing Business with Pleasure – Deductibility Of  Companion's Travel Expenses

Taxpayers often travel away on business and take a companion to accompany them. As a taxpayer, travel expenses incurred in the course of earning assessable income can be deductible provided there is sufficient connection between the expenditure incurred and the taxpayer’s business activities. However, what may not be so clear cut is whether a taxpayer can deduct the costs associated with taking a travelling companion with them.

In October 2013 the IRD released Exposure Draft QWB0130 – Income Tax – Deductibility of a Companion’s Travel Expenses (‘Exposure Draft’), which will update and replace several outdated documents once it is finalised.

The Exposure Draft states that in most cases, a companion’s travel expenses will not be deductible if the companion is accompanying the taxpayer simply for companionship or to attend social functions. This expenditure will not have a sufficient connection with the assessable income of the taxpayer’s business.

For example, Steve is a doctor and he attends an international medical conference in London. The purpose of the conference is to discuss new developments in medicine and to network with colleagues. The conference is directly relevant to his medical practice. The organisation presenting the conference expects that attendees will bring their partners, so his wife Sarah accompanies him. She meets with the other attendees’ partners and accompanies Steve to dinners and cocktail functions held as part of the conference.

Applying the principles in the exposure draft, Sarah’s travel expenses are not deductible. The Commissioner of Inland Revenue (CIR) states that it is irrelevant that the organisers of the conference expect Sarah to accompany Steve to conference functions. There is insufficient connection between Sarah’s companionship and the business activities undertaken by Steve.

The CIR’s position would remain the same even if:

  • Steve was a presenter at the conference,

  • Sarah was employed as a bookkeeper in Steve’s medical practice,

  • Steve had a medical condition that required the support of Sarah while he travelled.


A deduction may be permitted where the companion supports the taxpayer to a reasonably substantial degree in the business being undertaken.

This can be demonstrated where the companion, who does not need to be an expert in the affairs of the business nor do they need to be an employee, has some knowledge of the business being undertaken or possesses some special skill or expertise allowing them to contribute in a material way to the business being undertaken on the trip.

Returning to the earlier example, had Steve been running the conference and Sarah been running the registration process and organising the cocktail functions, then her travel expenses would likely be deductible as she has provided support to a reasonable degree in the business undertaken.

The CIR does not comment on to what extent an expense will be deductible if it provides a benefit to both parties (e.g. accommodation charged per room). Given the uncertainty that exists in this situation, it would have been useful if the CIR had also commented on this.

Mixing business with pleasure can indeed be a delicate balance. Be sure to check the role and the contribution a companion makes, and the connection with the taxpayer’s business when determining deductibility for tax purposes.


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