Rental Property Travel Deductions Now Denied

Tuesday, 15 November 2017, legislation was passed into law which will see most owners of residential rental properties denied deductions for travel expenses related to their properties. This law is backdated to any travel undertaken from 1 July 2017 onwards.

The legislation is quite wide in scope and covers travel for all purposes including travel for the purpose of inspecting, maintaining, and collecting rent, as well as undertaking repairs and maintenance, and also for seeing your Tax Agent for advice or services in relation to investment property.

Furthermore, the travel expenses cannot be capitalised either. That is, they cannot be included in any element of the property’s cost base or reduced cost base (and therefore cannot decrease your capital gain or increase your capital loss when you sell the property). Therefore, the travel expenses – such as airfares, accommodation and motor vehicle expenses – are disregarded altogether.
What you need to know:

  • You can still claim a deduction for the cost of employing other parties to carry out tasks on your behalf (such as real estate agents for carrying out property management services such as inspections, or tradespeople for carrying out repairs).
  • The denial of travel expense deductions applies only to residential premises that are being used by the tenant as a place to live (ie. property investors). It does not affect:
    • Residential premises that you own that are being used by the tenant for business purposes (for example, a house that has been re-fitted into a psychiatrist’s practice, doctor’s surgery etc.
    • Mixed-use premises (for example, where there is a convenience store downstairs and living quarters upstairs, but only for that part of the travel in relation to the convenience store)
    • Commercial premises (e.g. you are the landlord of a bakery or other commercial property).
    • If you are in the ‘business of property’ as opposed to being a ‘property investor’.

 

Question: Will I be able to claim travel to body Corporate Meetings? What about if I sit on the committee?

Answer: I’m afraid not. The legislation makes no exceptions for travel connected with residential investment properties.

 

Question: What can I claim travel for?

Answer: The legislation is very specific to property investors, however there are many other travel deductions that are permitted such as:

  • Travel to seek financial advice
  • Travel to obtain tax advice (excluding residential investment properties of course).
  • An employee’s work-related travel costs unreimbursed by the employer, or in excess of a travel allowance.
  • A self-employed individual’s business-related travel.
  • Travel to attend the AGM of a listed company which pays you dividends.
  • Travel where a potential business acquisition has been identified by an individual who has a genuine intention to start a business, but the transaction falls through.
  • Travel for self-education (conferences, seminars etc) where there is a clear nexus with income-producing activity and the learning activities are genuine (once again, excluding residential investment properties)
  • Travel costs of an itinerant worker.
  • Travel costs to transport bulky work equipment which cannot be stored at the worksite.
  • Travel to attend legal proceedings seeking recovery of an amount on revenue account.
  • Travel costs in contesting a Federal, State or Territory election (Not a political comment…).

So, if you need/want to visit your investment property why not synchronise your trip with tax deductible travel (apportioned of course). Politicians most certainly do….

 

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