Tax Tip 370: Deductions for Travel related to Investment property

Discussion in 'Accounting & Tax' started by Terry_w, 16th Aug, 2021.

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  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    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
     
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  2. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    craigc likes this.
  3. Bma

    Bma Well-Known Member

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    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?
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    not for residential
     
    Last edited: 5th Oct, 2021
  5. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    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.
     
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  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    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