From 1 July 2017 (i.e. the 2018 financial year) investors have no longer been able to claim deductions for travel expenses relating to collecting rent from or for inspecting, maintaining or repairing residential premises used as rental properties, subject to certain exceptions.
Travel expenses subject to the new restrictions would typically include (but are not limited to) motor vehicle expenses, taxi or hire car costs, public transport costs, road tolls, airfares and any meal or accommodation costs (where the travel necessitates an overnight stay).
The types of travel expenses subject to the new restriction include travel to inspect the property, collect rent from tenants, prepare the property for incoming tenants, maintain and/or undertake repairs to the property and undertake improvements to the property.
Additionally, there is no relief even where travel expenses are incurred because of extenuating circumstances, such as where urgent repairs are required as a result of a natural disaster or a destructive tenant.
Further to the above, any such non-deductible travel expenditure is also not eligible for the 5-year blackhole write-off.
Additionally, any travel expenses that are not deductible are also prevented from being included in any element of the cost base or reduced cost base of a residential investment property.
The travel deduction restrictions do not apply where the taxpayer falls into an excluded class of entity.
An excluded entity comprises any of the following entities:
- A corporate tax entity;
- A superannuation plan – that is not a self-managed superannuation fund (‘SMSF’);
- A public unit trust;
- Managed investment trust.
Effectively, the restrictions target individuals, discretionary trusts, SMSFs, partnerships and unit trusts (where at least one of the partners or unitholders are not an excluded entity).
Contact The Quinn Group on 02 9223 9166 or submit an online enquiry for further information in regards to correctly claiming rental property travel expenses.
