Tax Tip 370: Deductions for Travel related to Investment property

In the good old days people used to buy an apartment up in sunny QLD and go up there for about a week each year to ‘inspect’ the property and meet the agent. The poor old taxpayer was left with the ‘investor’ claiming a deduction for the airfare and hotels etc and subsidising their holiday.

A few years ago, section 26-31 ITAA97 was introduced which specifically prevents residential property investors from claiming travel


The effect of this is legitimate travel is now no longer claimable – such as driving to an investment property to do a repair.


But note that this section only applies to residential premises being used as residential accommodation.


It does not apply to

· Non-residential property s26-31(1)(a)

· Travel in relation to a business of Residential property s26-31(1)(b)

· Company owned property s26-31(2)(a) (if not acting as trustee)

· A unit trust where the unit holder is a company s26-31(2)(e)


Generally speaking, for residential property, an individual cannot claim travel, and neither can an SMSF or a trust, but a company can or a unit trust with a company unit holder can.

For non-residential property, or a residential property that is not being used as residential accommodation any entity can still claim travel.

This might include a residential house which is being used as a doctor’s surgery.

Read the law yourself at s 26-31 ITAA97

INCOME TAX ASSESSMENT ACT 1997 - SECT 26.31 Travel related to use of residential premises as residential accommodation

 

The ATO will look at council approvals for 1(a). I had somone they did this to. House was being rented for a medical practice. ATO checked council approval before they agree to travel costs.

And take care with short stay rentals. 1(b) is not straight forward. I would expect a private ruling.
Carrying on a business of letting rental properties - supporting information

 

If a trustee of a discretionary trust is to invest in real estate only, can it claim travel expenses for property viewing? Or attending to auctions?

 

not for residential

 

No entity can claim for such costs. They are preliminary expenses except for perhaps a company or unit trust that operates a property business. This would mean it needs to own signiifcant holdings that produce its income and profits. Under the former residential rules for travel, such costs were not deductible.

 

Here is a list of my tips in relation to claiming travel expenses, I just recorded a podcast episode on this topic which should be out in a couple of weeks

Tax Tip 211: Deductions for Travel Expenses Related to Property Tax Tip 211: Deductions for Travel Expenses Related to Property

Tax Tip 224: Can you claim Travel Relating to Property off CGT? Tax Tip 224: Can you claim Travel Relating to Property off CGT?

Tax Tip 370: Deductions for Travel related to Investment property Tax Tip 370: Deductions for Travel related to Investment property

Tax Tip 417: Travel in Relation to Residential Property could be Deductible Tax Tip 417: Travel in Relation to Residential Property could be Deductible