Rental Property Travel Deductions Now Denied 

Tax on Rental PropertiesArticle from Australian Taxation Reporter.

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 the 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.

The denial of travel expense deductions applies only to residential premises that are being used by the tenant as a place to live. It follows that deductions will still be allowed for your travel to:

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).

Take-Away Points

Only travel related to the earning of residential rent is denied a deduction and cannot form part of your cost base
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). Indeed, where your travel expenses are significant, you may now wish to consider engaging the services of these other parties.

The strategy of combining a weekend holiday with travel to your rental property, and apportioning the deduction is no longer allowable. None of the travel will be deductible from 1 July 2017.

Do you have a tax related question that you need assistance with? For all your tax returns and other tax requirements, contact Integra Business Accountants. Contact the team on 9527 3071 today and speak to one of our friendly, experienced team members about how to get it lodged for you.