Travel Expenses for Property

Discussion in 'Accounting & Tax' started by money, 22nd Jul, 2018.

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  1. money

    money Well-Known Member

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    It's my understanding that travel expenses to visit a commercial property and the managing agent is still allowed but if it's a residential property it's disallowed.

    I've also read an article by PWC saying "the changes will affect individuals, self-managed super funds (SMSFs) and discretionary trusts which invest in residential real estate". Does that mean a residential property held in a unit trust will still be allowed to claim travel expenses?
     
  2. Terry_w

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

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    Unit trust no
    But company, not acting as trustee, then yes it is possible.

    But it is a question of how a company can claim travel expenses - perhaps it could reimburse a director for the use of their personal car for company related expenses.
    An accountant would know - @Paul@PFI
     
  3. Paul@PAS

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

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    If the company doesnt own a car then how can in incur a travel expense ?

    Need to also avoid a Part IVA scheme.
     
  4. Terry_w

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

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    True, but many employers reimburse employees for use of their private cars.
     
  5. Paul@PAS

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

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    Perhaps.....Depends if its a trust beneficiary or employee too. The trustee may lawfully reimburse for expenses they incur BUT...Then they must meet the nexus in s8-1 or no deduction. (ie costs necessarily incurred in producing assessable income). A Trustee Director doesnt have that right to incur costs and claim a deduction. Or a beneficiary in most trusts.

    If a trust pays them it could be a non-deductible outgoing ? And the vehicle owner cant claim them either ? A better option may be an allowance paid (actually paid) by the trust. This assessable income may enable the person to claim a deduction under s8-1

    Sometimes if the car is under $20K there can be merits in the individually selling the vehicle to the trust / company etc in due course if it operates a small business. Bring fwd the depreciation using the $20K max write off (subject to a logbook)
     
  6. Terry_w

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

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    In this case it would need to be a company as a trust could not claim travel allowance. The company could probably claim it on the same basis that people used to be able to claim costs travelling to inspect investment properties - the connection to rental income.
     
  7. Paul@PAS

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

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    I would not be choosing a company merely for the access to travel deductions. Additional costs would likely exceed any benefits. Depending on the state land tax benefits could also arises. But weigh up v's lending since fewer lenders will lend at high LVR and ne gearing etc is all a concern etc.

    Some of the potential costs include:
    ASIC fee, company financials and tax v's an extra schedule to individual tax, cost to establish entity, legal advice, tax advice, complexities with franking credits (30%) etc and loss of 50% CGT discount.
     
  8. Terry_w

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

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    Certainly not the reason to use a company. But one thing to consider of many. One of the major benefits of a company is the land tax threshold in NSW and VIC and the asset protection benefits - not to mention borrowing ability.