Understanding travel expenses

While volunteer board members may not expect to be rewarded for their services, the absence of any remuneration can leave them unduly out of pocket.

Observers of not-for-profit (NFP) boards will have noticed a renewed focus recently on skills diversity. Many NFP boards have set out to attract not only industry professionals but also legal, tax and media specialists to assist them in achieving their aims while minimising risk.

Historically, it was more difficult for boards to attract and retain qualified board members. Now, however, as more industry and technical professionals seek to give something back to their communities, more are signing up to join NFP boards, usually on a voluntary basis.

While board members may not expect to receive payment for their services, the absence of reimbursement for incidental expenses can leave board members unduly out of pocket. It is crucial to find a balance between recognising and compensating volunteers for the costs they incur in providing their services, and minimising costs to the NFP.

For example, directors may incur travel expenses in carrying out their duties, including transport, accommodation, meals and incidentals. Where an NFP reimburses or pays a travel allowance, fringe benefits tax (FBT) may apply, depending on whether the director is considered an employee under the FBT rules. Paid directors are generally subject to FBT, whereas benefits provided to volunteers are generally outside the FBT regime.

The following considers an NFP covering travel expenses as an example of how an NFP may effectively compensate volunteer directors for out-of-pocket expenses.

Travel expenses

With some consideration and planning, NFPs may be able to effectively structure the engagement of their directors to compensate the directors for costs incurred without giving rise to additional FBT, or to enable the director to claim an income tax deduction for costs incurred.

Non-deductible travel expenses

With both Treasury and the Australian Taxation Office (ATO) focused on work-related deductions, NFPs should be mindful of the proposed changes and commentary in structuring director agreements. The ATO's Draft Taxation Ruling (TR) 2017/D6 provides guidance on when an employee's travel expenses are deductible. The Draft Ruling is intended to supersede and clarify a number of historical positions adopted by the ATO regarding deductible travel.

Generally, a tax deduction is available for work-related travel expenses, including air fares, accommodation, meals and other incidentals. The Draft Ruling specifies there are four categories of travel:

  • Ordinary home to work travel
  • Special demands travel, including consideration of:
    • Remoteness of the work location
    • Requirement to move continually between work locations
    • Requirement to work away from home for an extended period
  • Co-existing work location travel (working in more than one location)
  • Relocation travel (relocating from a usual place of residence to undertake work duties).

Directors may only claim an income tax deduction where travel is because of special demands or in respect of multiple work locations.


A Melbourne-based director flies to and from Sydney to attend board meetings and a charity's annual gala event. If the director volunteers their time and services and receives no compensation for the travel costs incurred, no personal tax deduction may be available.

The ATO will not allow a deduction for the travel expenses where the reason for travel is merely home to work or vice versa. There is no deduction for travel expenses incurred because a taxpayer decides to live away from where their work duties are required to be carried out. Further, because the director volunteers their time and services, a deduction may also be denied because there is no nexus between the costs incurred by the director and any income-producing activities.

Options for NFPs

Subject to the terms of the NFP constitution or establishment documentation, the method of compensating directors for travel expenditure in light of deductibility considerations may take different forms, including reimbursements, allowances or honorariums.


Each of these is considered further below.

1. Reimbursements

The NFP may choose to make selective or proportionate reimbursement of expenses incurred by the director. Reimbursements are provided for actual expenditure only.

2. Allowances

An allowance for expenses expected to be incurred by the director may be paid by the NFP irrespective of the actual expenses incurred.

Assuming the director does not have a similar paid role or carry on a similar business outside of their work for your NFP such that their travel may ordinarily be deductible, the NFP could look to pay an allowance. The allowance would be assessable income for the director.

PAYG withholding obligations for an allowance are subject to the Commissioner's annual reasonable allowance amounts (usually around $300 per day). Where the payment is below the reasonable amount, no withholding or annual payment summary obligations should arise. Taxation Determination TD 2018/11 notes a reasonable allowance amount would be based on what the NFP is paying the director, rather than the director's actual income from all sources.

The director would then need to consider the deductibility of any travel expenses they have paid.

3. Honorariums

An honorary payment by the NFP can be paid to the director in respect of the volunteered services. The tax implications of honorariums are generally dependent on the ordinary business and employment activities of the recipient director but can be non-assessable where there is an intention to merely meet incurred or anticipated expenses.

Consideration should be given as to whether the director is performing a similar role or service on a paid basis for other organisations. If so, the NFP may be able to pay the director a nominal amount as an assessable honorarium. The honorarium may also have PAYG withholding obligations.

The director would then need to consider the deductibility of any travel expenses they have paid.

Deductible travel expenditure

The Draft Ruling provides that travel expenditure may be deductible where:

  • The travel is at the direction of the employer
  • The traveller is paid to conduct the travel (e.g. daily allowance paid includes "travel days" as well as "working days")
  • The work required to be completed includes a travel obligation, and
  • The travel is not contrived to give the appearance of work-related travel.

Example (continued)

Using the same facts as above, the travel may be deductible to the extent that the director's travel is required by the NFP under the terms of the director's agreement and there is a financial reward for director services, for example as an allowance or honorarium.

Compensation for travel or other such expenses provided by NFPs to remunerated directors will likely attract either FBT or PAYG-Withholding obligations.

For more information on potential withholding obligations, refer to ATO website QC 51680.

Application of FBT where directors are paid for services

FBT is intended to apply to benefits provided by employers to their employees, but the broad definition of "employee" means that these provisions may also apply to NFPs providing benefits to paid directors. Where the expenditure is deductible, the otherwise deductible rule should apply, meaning there will be no FBT.

FBT may apply to the extent that the travel is not deductible. However, as many NFPs have an FBT exemption or are FBT rebatable employers, the actual cost to NFPs of reimbursing non-deductible travel may be minimal.

Specifically, exempt employers can reimburse up to $14,421 (GST inclusive) of travel costs to a director before an FBT liability arises (assuming no other benefits are provided to the director). Rebatable employers can potentially reduce their FBT liability on the same amount of travel expenses from $14,099 down to $7,473.

Use of the FBT exemption or rebatable caps can be an effective method of recognising the contributions that directors make to NFPs without substantial outlay.

This Help Sheet was created by Courtney Ashworth and Kerry Hicks, tax specialists at Moore Stephens.