If your employer pays you an allowance when you travel overnight for work, the ATO treats that money as income. The good news is that the accommodation, meals and incidental costs you incur on the trip are generally deductible, and if your allowance and claim sit within the ATO’s published “reasonable amounts”, you can claim without keeping a receipt for every coffee and sandwich.
This guide explains how the ATO’s overnight travel allowance rules work for the 2025-26 return you are lodging now and for the 2026-27 year that started on 1 July 2026. It covers when the allowance is taxable, the current reasonable rates from Taxation Determinations TD 2025/4 and TD 2026/4, the records you still need, and the mistakes that most often trigger ATO questions.
It is written for employees, employers who pay allowances, and sole traders who travel for business. If you drive trucks for a living, our guide to truck driver tax deductions covers the separate reasonable meal amounts for employee truck drivers.
Key takeaways
- A travel allowance is assessable income. If it is on your income statement you must declare it, then claim your deductible travel expenses against it.
- The reasonable amounts are a record-keeping shortcut, not a free deduction. You can only claim what you actually spent, and you must still be able to show you travelled for work.
- 2026-27 reasonable amounts (TD 2026/4): breakfast $36.00, lunch $40.45, dinner $69.00, incidentals $25.40, overtime meal $40, and accommodation from $141 (other country centres) to $230 (Sydney) for employees earning $153,210 or less.
- Claim above the reasonable amount and the shortcut disappears – you need written evidence for the whole claim for that trip.
- Sole traders and contractors without a bona fide allowance must keep receipts for everything, and a travel diary for trips of six nights or more.
- LAFHA is different. A living-away-from-home allowance is an FBT matter for your employer and is not income you claim deductions against.
Overnight travel allowance at a glance
| Question | 2025-26 (return you lodge now) | 2026-27 (current year) |
|---|---|---|
| Determination that sets reasonable amounts | TD 2025/4 | TD 2026/4 |
| Salary bands for Table 1 / 2 / 3 | $148,250 or less / $148,251-$263,850 / $263,851 or more | $153,210 or less / $153,211-$272,680 / $272,681 or more |
| Meals, lowest salary band (breakfast / lunch / dinner) | $34.75 / $39.10 / $66.65 | $36.00 / $40.45 / $69.00 |
| Incidentals per day, lowest band | $24.50 | $25.40 |
| Overtime meal allowance | $38.65 | $40.00 |
| Accommodation, lowest band – Sydney / Melbourne / Brisbane / Perth | $223 / $173 / $181 / $180 | $230 / $175 / $188 / $180 |
| Accommodation, lowest band – Adelaide / Canberra / Darwin / Hobart | $158 / $178 / $220 / $176 | $158 / $178 / $220 / $176 |
| Accommodation, other country centres | $141 | $141 |
| Employee truck drivers (breakfast / lunch / dinner) | $31.15 / $35.55 / $61.30 | $32.25 / $36.80 / $63.45 |
Source: ATO Taxation Determinations TD 2025/4 and TD 2026/4, Table 1 amounts for the lowest salary band. Higher salary bands and high-cost country centres have higher amounts (Tables 2 to 4 of each determination).
What is an overnight travel allowance?
An overnight travel allowance is a payment from your employer to cover the accommodation, meals and incidental expenses you expect to incur when you travel for work and sleep away from your home. It is usually a fixed amount per night or per day, paid under an award, enterprise agreement or company policy, and it is paid before or regardless of what you actually spend.
That makes it different from a reimbursement. When your employer reimburses you, you hand in receipts and get back exactly what you paid. A reimbursement is not income to you and you cannot claim a deduction for the reimbursed expense. An allowance, on the other hand, is yours to spend as you see fit, which is why the ATO treats it as income and lets you claim your actual deductible expenses against it.
The ATO describes a bona fide travel allowance as one that could reasonably be expected to cover the costs it is paid for. A token payment of $20 a night labelled “travel allowance” does not unlock the record-keeping exception. The allowance covers three categories:
- Accommodation – hotels, motels and serviced apartments. The ATO’s reasonable accommodation amounts only apply to short stays in commercial establishments like these, not to hostels, caravan parks or staying with friends.
- Meals – breakfast, lunch and dinner that fall within the period you are travelling.
- Incidentals – small costs that come with being away, such as laundry, tips, or a newspaper.
Is a travel allowance taxable?
Yes. A travel allowance is assessable income and, where it appears on your income statement, you must include it in your tax return. Your deductible travel expenses are then claimed separately as work-related travel expenses. In most cases the deduction roughly offsets the allowance, so the net tax effect is small, but the two amounts must be shown separately.
When the allowance is not on your income statement
Employers are not required to withhold tax from a travel allowance, or show it on your income statement, where it covers domestic accommodation, meals and incidentals (or overseas meals and incidentals), it is at or below the ATO’s reasonable amounts, and the employer expects you to spend it in full. Anything above the reasonable amounts, and any overseas accommodation component, is withheld on and reported, so it will appear on your income statement. If your allowance is not shown on your income statement, you spent it all on deductible expenses, and your claim would be no more than the reasonable amount, the ATO says you can simply leave both the allowance and the deduction out of your return.
If you want to claim more than the allowance because you spent more, you must include the allowance as income and claim the full deductible amount with written evidence. Employers can check their withholding and STP obligations on the ATO’s travel allowances withholding page.
Example: allowance shown on the income statement
Mia is paid $600 for a two-night work trip to Brisbane in 2026-27. The allowance is on her income statement. She declares the $600 and spent $560 on a hotel, meals and taxis, all within the reasonable amounts. She claims a $560 deduction without needing meal receipts, keeps her hotel confirmation and flight itinerary as proof of travel, and pays tax on the $40 she did not spend.
What are the ATO reasonable travel allowance amounts?
Each year the Commissioner publishes a Taxation Determination setting the amounts considered reasonable for accommodation, meals and incidentals on domestic travel, for overseas meals and incidentals, and for overtime meals. For 2025-26 the determination is TD 2025/4; for the year that began on 1 July 2026 it is TD 2026/4. The amounts depend on your annual salary (three bands), the destination (each capital city, listed high-cost country centres, and “other country centres”), and which meals fall within your travel period.
For an employee on $153,210 or less travelling in 2026-27, the daily meal and incidental total is $170.85 ($36.00 + $40.45 + $69.00 + $25.40). Add the accommodation amount for the city and you get the daily totals TD 2026/4 publishes: for example $400.85 in Sydney, $345.85 in Melbourne, $358.85 in Brisbane and $350.85 in Perth. Part-time employees annualise their salary to work out which salary band applies.
How the meal amounts work in practice
The reasonable amounts only apply to meals that fall within your travel period. The determination gives the example of leaving at 10 am on Monday and returning at 3 pm on Tuesday: you can apply the lunch and dinner amounts for Monday and the breakfast and lunch amounts for Tuesday, but not Monday breakfast or Tuesday dinner. You also cannot swap an amount you did not spend on one meal to another meal or to accommodation.
The accommodation amount is a per-night figure and is only available for short stays in commercial accommodation. Overseas accommodation is never covered by the exception: the ATO requires written evidence for all overseas accommodation, even if your allowance covered it.
Rule of thumb
The reasonable amounts tell you how much you can claim without receipts, not how much you can claim. If you spent $45 on dinner, you claim $45, not $69. If you spent $90 on dinner and want to claim $90, you need the receipt, and once you go above the reasonable amount for any expense on that trip the exception falls away for the whole trip.
When can you claim without receipts, and what records do you still need?
The substantiation exception for travel allowance expenses applies when all of the following are true:
- You are an employee who received a bona fide travel allowance from your employer to cover the expenses.
- You slept away from your home overnight in the course of your work.
- You actually incurred the expenses. You cannot claim meals your employer paid for, or nights you stayed with family for free.
- Your claim for each category (accommodation, meals, incidentals) is no more than the reasonable amount for the location, your salary band and the meals within your travel period.
Even when the exception applies, “no receipts” does not mean “no records”. If the ATO reviews your return it will ask you to show that you travelled for work, that you were paid an allowance, and how you calculated the claim. Keep your roster or travel approval, flight or accommodation bookings, a diary note of what you spent, and your payslips showing the allowance. Bank statements that show meal purchases in the destination city are a simple way to demonstrate you incurred the costs.
Travel diary
If you are away for six or more consecutive nights you normally need a travel diary recording the date, place, time and duration of each work activity. The diary is not required where the travel allowance record-keeping exception covers your claim, but it is still a sensible habit for any longer trip, especially if part of the trip is private.
When you need written evidence for everything
You lose the exception, and must keep written evidence for the whole claim for that trip, if you did not receive a bona fide allowance, you claim more than the reasonable amount for any expense, or the expense is overseas accommodation. Written evidence means a document from the supplier showing the supplier’s name, the amount, the nature of the goods or services, the date paid and the date of the document. The ATO’s records you need to keep page sets out the formats it accepts, including photos of receipts stored in the myDeductions tool.
Travel allowance vs living-away-from-home allowance (LAFHA)
This is the distinction that causes the most confusion and the most expensive errors. The ATO draws the line based on whether you are travelling for work or living at a different location for work:
| Travel allowance | Living-away-from-home allowance (LAFHA) | |
|---|---|---|
| Situation | Short trips; you keep living at your usual home and sleep away temporarily | You are required to live away from your usual home for an extended period to do your job |
| Tax treatment for the employee | Assessable income; deductions claimed for actual travel expenses | A fringe benefit; generally not assessable income, no deductions |
| Who pays the tax | The employee, through their tax return | The employer, through FBT (with concessions if conditions are met) |
| Typical indicators | Days or a few weeks; family stays home; you return to your usual residence after each trip | Months at a time; often relocates with family or maintains two homes; employer requires the relocation |
The ATO’s view is set out in Taxation Ruling TR 2021/4 and Practical Compliance Guideline PCG 2021/3, which give employers a 21-day safe harbour for short-term travel and factors for longer arrangements. Employers can read the ATO’s guidance on living-away-from-home allowance fringe benefits. If you are an employer unsure how to classify a payment, that is a question for your payroll setup, not something to fix at tax time; our bookkeeping and payroll team can help.
Worked examples
Example 1: employee within the reasonable amounts (2026-27)
Daniel earns $95,000 and travels from Melbourne to Sydney for a two-night work trip, leaving at 7 am on Tuesday and returning at 6 pm on Thursday. His employer pays a $750 travel allowance that is shown on his income statement. Under TD 2026/4 the reasonable amounts for his trip are accommodation $230 x 2 = $460, meals on Tuesday and Wednesday $145.45 x 2 = $290.90, Thursday breakfast and lunch $76.45, and incidentals $25.40 x 3 = $76.20, a total of $903.55.
Daniel spent $410 on the hotel, roughly $230 on meals and $40 on laundry and tips, a total of about $680. Every category is under the reasonable amount, so he declares the $750 allowance, claims a $680 deduction without meal receipts, and keeps his flight itinerary, hotel confirmation and a note of his spending. Tax is payable on the $70 he did not spend.
Example 2: employee who spends more than the reasonable amount
On the same trip, Daniel’s hotel costs $320 a night ($640 total). Because his accommodation claim exceeds the $460 reasonable amount, the exception no longer protects him. If he wants to claim the full $640 plus his meals and incidentals, he needs written evidence for all of it, including meal receipts. If he cannot produce receipts, his deduction is limited to what he can substantiate.
Example 3: sole trader travelling for business
Priya runs a consulting business as a sole trader and spends three nights in Perth meeting clients. She receives no allowance, so the reasonable amounts do not apply to her at all. She keeps tax invoices for her flights, hotel and meals, claims the business portion as deductions, and because she stayed on for two private days she apportions the airfare and excludes the private nights. See our guide to work-related tax deductions for the general rules on mixed-purpose trips, and our earlier overview of work-related tax deductions in 2025.
Common mistakes the ATO looks for
- Claiming the reasonable amount instead of what you spent. The amounts are a substantiation threshold. Claiming $69 for every dinner when you ate a $15 kebab is an overclaim.
- Claiming without an overnight stay. Day trips are not covered by the travel allowance rules. Meals on a day trip are private unless you are claiming an overtime meal allowance under its own rules.
- Double dipping. If your employer paid the hotel on a corporate card or reimbursed a meal, you cannot also claim it.
- Using the wrong year’s rates. The 2025-26 return uses TD 2025/4; travel from 1 July 2026 uses TD 2026/4. Rates and salary bands change every year.
- Treating LAFHA as a travel allowance. Employees who claim deductions against a LAFHA, or employers who pay a travel allowance for what is really a living-away arrangement, create problems on both sides.
- No proof of travel. Receipts may not be required, but if you cannot show you were on a work trip the deduction will be denied.
- Adding private days without apportioning. Extend a Sydney work trip by a weekend and the extra accommodation and meals are private.
Quick checklist before you lodge
- Find the allowance on your income statement and confirm whether it has been reported.
- Check the salary band and destination amounts in the determination for the year you travelled.
- List what you actually spent on accommodation, meals and incidentals for each trip.
- Confirm each category is at or below the reasonable amount. If not, gather receipts for the whole trip.
- Keep proof of travel (bookings, itinerary, roster) and a note of how you worked out the claim.
- Keep a travel diary for trips of six or more consecutive nights, and apportion any private days.
- Keep your records for five years from the date you lodge.
FAQ about the ATO overnight travel allowance
Do I need receipts for an overnight travel allowance claim?
Not for every expense, if the record-keeping exception applies: you received a bona fide travel allowance, you slept away from home for work, you actually spent the money, and your claim is no more than the ATO’s reasonable amount for the location and your salary band. You still need to be able to show that you travelled for work (for example, your roster, itinerary, boarding passes or a hotel booking) and how you worked out the claim. If you claim more than the reasonable amount, you need written evidence for the whole claim, not just the excess.
What are the ATO reasonable travel allowance amounts for 2026-27?
They are published in Taxation Determination TD 2026/4. For an employee earning $153,210 or less, the meal amounts are breakfast $36.00, lunch $40.45 and dinner $69.00, incidentals are $25.40 a day, and accommodation ranges from $141 in other country centres to $230 in Sydney. The overtime meal amount is $40. The 2025-26 figures (TD 2025/4) were breakfast $34.75, lunch $39.10, dinner $66.65, incidentals $24.50 and overtime meals $38.65.
Is a travel allowance tax-free in Australia?
No. A travel allowance is assessable income. If it appears on your income statement, you declare it and then claim a deduction for the deductible travel expenses you incurred. The one practical exception: if the allowance is not shown on your income statement, you spent it all on deductible expenses and your claim would be within the reasonable amounts, you can leave both the allowance and the deduction out of your return.
What is the difference between a travel allowance and LAFHA?
A travel allowance covers short work trips where you keep living at your usual home and sleep away temporarily. It is income to you and you claim deductions against it. A living-away-from-home allowance (LAFHA) is paid when you have to live at a different location for an extended period for work. LAFHA is a fringe benefit dealt with under the FBT rules by your employer and is generally not assessable income to you, so you cannot claim deductions against it either.
Can a sole trader use the reasonable amounts?
No. The substantiation exception only applies to employees who receive a bona fide travel allowance. A sole trader or company director paying their own travel costs must keep written evidence (tax invoices and receipts) for every accommodation, meal and incidental expense they claim, and a travel diary for trips of six or more consecutive nights.
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Travel claims are one of the ATO’s perennial focus areas, and the difference between a smooth return and an audit letter usually comes down to whether the allowance, the determination and the records line up. Nanak Accountants prepares returns for employees, FIFO and project workers, sole traders and employers across Australia. Call 1300 626 258 or book a consultation and we will check your travel claim against the current determination before it is lodged.
This article is general information only and is not personal tax advice. Reasonable amounts, salary bands and record-keeping rules were checked against ATO Taxation Determinations TD 2025/4 and TD 2026/4 and ATO guidance on 6 October 2026.
