I recently did a technical presentation in Bangkok to a group of family business people. And while the material, and discussions afterwards, were enlightening, I was eager to see some of this great city.A group of us went to the Skybar. It was incredible. The view was amazing. The people (except me of course) were dead set beautiful and the atmosphere was electric. I had one night in this city and I wanted to really experience it.The guys with me were also present at my seminar. The conversation moved around but it inevitably came back to how our business tried to impact on families that were branching overseas – and Asia in particular.It then became my time to buy a drink for the group.A beer cost AUD $25. Ouch.And there was 16 of us present.Double ouch.Anyway. I sucked it in and bought a round. At no stage could I have done a runner on the group. Firstly it is not cool and secondly it would have been the kiss of death for any fledgling relationship.But the question hangs. Was it fair of me to charge this cost to my business? How do you make sure everybody is equal? How do you balance up needs of different owners? Can I get a tax deduction? And how do you keep receipts for all this stuff?Enter the concept of a travel allowance. These things basically take away the need to keep receipts while travelling so come tax time your life managing a family business is a lot easier.So what is a travel allowance?It is a payment to cover the costs while an employee is travelling away from home for work. Typically a travel allowance covers the cost of meals, incidentals and accommodation in Australia but only the cost of meals and incidentals while overseas – and it does not need to be backed up tax invoices.You can pay a travel allowance to any employee even if they do not receive a salary. This is important in a family business as family members are often working directors but do not receive a straight PAYGW salary.How much is the travel allowance?Each year the Tax Office issues guidelines as to how much the allowance can be for a person. The current allowance rates are at TD 2016/13 and most people find the rates relatively generous.And the rates are staggered to allow for different levels of seniority in the family business to be recognised.The main benefitIf you are paid a bona fide travel allowance while travelling you can claim a tax deduction for the same amount without keeping receipts to prove it.This is important. Most often people, especially family members, will give up on the tax deduction as it is simply “too hard”. Receipts will also be lost and the receipts could be in another country so they are borderline useless in understanding what you did a while back.The word “bona fide” is important. You have to have incurred expenditure in relation to your travel.So if you chose to stay at a mates house for free in Sydney and you did not pay a sent for the trip you cannot claim a travel allowance.Privacy The other benefit of a travel allowance is that it gives a family member a level of privacy. Sometimes in a family business the families details can become quite involved. Mums might be looking at every penny and the control could become stifling. So if a family member spent a bit too much one evening – it is good to know that the allowance simply covers the cost without having to “fess up” to ones indiscretions.An allowance is not forced upon youSimply because the Tax Office sets a maximum rate for a travel allowance does not mean that you must pay this amount to employees in your family business. This is a maximum rate. Your family business can choose how much to pay staff while travelling.Of course the words “bona fide” means that the payment must be realistic and not a tax fiction. Paying your staff $6 a day for accommodation, meals and taxi fares is not a bona fide allowance.A travel allowance does not stop your legitimate tax claimOf course there are many legitimate reasons why you have incurred more while travelling than the amount set by the Tax Office.In this case you simply tally up the actual costs incurred while travelling and you claim these as a tax deduction – either personally or through your family business. The travel allowance is their to alleviate receipts. It does not stop you claiming legitimate costs.Are you travelling?Most often the concept of travelling is quite simple. However where a person is going on an extended trip it can become confusing – at what point in time is a person simply travelling through a city as opposed to living in a city?The Tax Office have a general directive that if you are away from home for less than 21 days – you are travelling.This is a guide of course and varies depending on the facts. So if you are say, a country sales agent in the family business you might be away from home for 6 months – but only sleeping two nights in one town at a time.EqualisationImportantly – the concept of travel among family members is a sensitive one. Petty jealousy can arise from family member to family member. Often travel is seen as a “perk” for working in the family business by some and a menial chore by others.If you are in the family business – write up a policy on family members and travelling. Make it clear who can and cannot and the basis the decision is made. If it is really being done because they are family – own up to it. Likewise if the people travelling are doing so in the family business simply to make the family business great – clearly articulate that and discuss it among the family.Using travel allowances within the family creates a level playing field for all and does so tax effectively. This can be of a value to the family business significantly more than a few extra dollars of tax deductions.
My travel club story: Last year, my family took a “free” vacation with the obligation to attend a 90 minute Vacation Club Sales Presentation. We told ourselves before the meeting that “there is no way we are buying”. We planned to listen to what they had to say and then politely decline. At that time, taking a “freebie” vacation was about all we could manage. My husband and I are self-employed and the economy had hit us hard. So, when I received a call offering free beachfront accommodations, in exchange for 90 minutes of our time, I accepted.The Meeting: When we arrived at the meeting (Florida Destinations) in Daytona Beach, we were served coffee and doughnuts. Each couple was assigned a sales rep and brought into a larger room to watch a video presentation of the benefits of Vacation Club Membership. By the end of the video, and the sales pitch that followed, my husband and I were wavering on our decision to “just say NO”. However, when they disclosed the price of $7995, we had to decline, because it simply wasn’t in our budget. We were then passed off from one high pressure salesperson to another where the price dropped from $7995 to $1595.But what about all those people in the large room that had paid the full price? It didn’t seem fair to me that simply by saying “no” a few times, the price declined by 80%. When the sales manager left the room for a moment, I turned his computer around and did some quick research on the BBB. He had told me they had a “B+” rating, but when I checked, it was an “F”. That made a “no” much easier! When he came back in the room, he was embarrassed and released us to go, but if we changed our minds, his offer would hold until the following morning. At this point, he just wanted us to leave.I made the decision that IF there were a Travel Club out there that was reputable and economical, I would consider joining. We loved the idea of vacationing for less but weren’t sure if there was a better alternative to what we had just witnessed.So, when we got home the following week, I began to research. I found 3 legitimate travel clubs, and for two days I read reviews and found as much information as I could on each one. Although all three companies held high standards, had a large club membership and quality properties, there was one club that seemed better than the rest. This particular travel club had an enrollment fee that was a fraction of the other two, and when I learned that it had more resorts, condos, villas and hotels than all other clubs combined, it became my favorite.Can a Travel Club Save You Money?Absolutely, but the wrong travel club could charge you too much and have little to offer after enrollment. Before considering a travel club, consider the following:
Enrollment Costs: This can vary from a few hundred dollars up to $10,000. A good quality travel club shouldn’t charge you a fortune. It’s a good idea to stay under 1,000 for enrollment fee.
NO fees, dues or up-charges of any kind: You can’t save money on your vacations if you have yearly or monthly fees. If you want to pay fees of this kind, consider a timeshare.
Selection: A high quality travel club should have thousands of quality properties all over the world, not just one specific location.
Customer Service: Look for a club where you can call a representative or at least expect a call back if you have a question. Concierge Desks can be invaluable when planning a vacation, but not all travel clubs have a concierge desk.
More than one type of resort they represent: One of the top 3 vacation clubs ONLY represents Crown Resorts. Since they don’t have the top 9 Resort Companies, prices tend to be higher than at a club where all 9 companies are competing against each other for your business as a member.
Properties offered to members at the cost they were acquired: Resorts and condos should not be “marked up” before they are offered to its members. Public travel brokers like Expedia, Priceline, and Kayak have to mark up their inventory before offering it to the public to cover advertising and management expenses. A good “private” travel club will not mark-up inventory, the members have full access to bottom-dollar pricing.
Quality Resorts: Make sure your travel club is offering top line destinations. Don’t settle for anything less than 3,4 & 5-Star Resorts, condos, hotels and villas.Benefits of a High Quality Private Travel Club:
Save Money: Of course, everyone wants to save money. You should expect to save 30-50% on each vacation, and sometimes upwards of 80-90%, especially on last-minute travel to specific destinations.
Low Effort: A good travel club will have done all the research for you. Instead of spending hours comparing prices between sites, all your options will be in one location for you to browse online or talk to a travel representative.
A Concierge Desk: This is a great perk some travel clubs offer. Use them if they are available, they can save you additional money on everything from rental cars and limousines to Operas, Dinner Shows and Rafting Tours.
Members only perks: Enjoy 2 for 1 Cruises, Kids cruise free, All -Inclusive Resorts, coupons and travel tips.
No Black Out Dates: You should be able to travel during any holiday or high travel week without exception.