travel away on
business and take
a companion to
As a taxpayer,
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
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which will update and replace several outdated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.
WHEN WILL A DEDUCTION BE PERMITTED?
A deduction may be permitted where the
companion supports the taxpayer to a reasonably
substantial degree in the business being
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
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.