From the 1 July 2017, expenses for travel to residential investment properties are no longer deductible. You cannot claim a travel deduction if you are an individual, Self Managed Super Fund (SMSF), partnership or private trust.
The issued media release stated that the change ‘is an integrity measure to address concerns that such deductions are being abused. This will rein in a high growth deduction item and improve taxpayer confidence in the negative gearing system.’
Travel expenses includes when you travel to the property to carry out repairs, maintenance such as gardening, collecting rent, visiting your real estate agent and attending body corporate meetings.
You can still claim a deduction if the travel relates to the 2017 financial year or earlier, relates to a commercial property, you are an excluded entity or you carry on a rental property business.
An excluded entity is:
- a corporate tax entity
- a superannuation plan that is not a Self Managed Superannuation Fund
- a public unit trust
- a managed investment trust
- a unit trust or a partnership, members of which are entities of a type listed above
It is also important to note that these travel costs cannot form part of the cost base of a Capital Gains Tax (CGT) asset. This means that it cannot be included as a cost when you sell your property such as to reduce your capital gain or increase your capital loss.
You can still claim travel deductions where it is a residential property being used by the tenant for business purposes. For example, it is a house that is being used as a doctor’s surgery.
You can claim a deduction for the cost of paying another party to carry out necessary activities relating to the property on your behalf. For example, real estate agents when managing your property and carrying out inspections or tradespeople for completing repairs.
The Australian Taxation Office (ATO) is also warning that you cannot claim the cost of attending seminars that teaches you how to find a suitable rental property to invest in. This includes travel to these seminars and the cost of accommodation. Seminars are only tax deductible if they relate to producing income from the property.