Would travel cost be deductible after contract signing but before settlement?

Just signed a contract on a house interstate with 60 days settlement and 14 days building/pest inspections. Wondering if I fly there, inspect the house with the inspector and talk to the agent face to face on a few further details, would the travel cost be deductible please?

According to ATO website: "If you fly to inspect your rental property, stay overnight, and return home on the following day, all of the airfare and accommodation would generally be allowed as a deduction because the only purpose of your trip was to inspect your rental property."

Not sure if this house is now my property . Many thanks for the help.

 

Sounds like a capital cost. You don't own it yet and if it's subject to building and pest it isn't even an unconditional contract. Keep records and receipts if adding back to cost base for the future.

 

Whats the purpose of the trip. Sounds like a capital expense to me because there is no rent.

 

Generally no. The cost is preliminary to income. A capital cost.

Rental properties - claiming travel expenses deductions | Australian Taxation Office

 

Hi Terry,
The trip is to inspect the property with B&P inspector and meet with the selling agent for a few details. It will be a single day trip so the whole purpose of the trip would be for the IP.
Also, what exactly does capital cost mean in this case? Does it mean that if I sell the property in the future, this cost will be added to the purchase price so that I pay less CGT? Many thanks for your help.

 

Yeah probably not deductible. A capital cost is one related to acquiring an asset you intend to hold on to.

 

On this note what about the initial trip? Fly to QLD inspect 7 properties. Sign a contract on one. Is this able to be included as a capital cost? Or only after the contract is signed?

 

Nope

 

if you already own an investment property in that state you could say it is to visit the one you already own.

 

You couldn't just say that, but would have to actually visit that property to actually be able to legitimately claim the expenses, and have evidence ready in case of an audit. if it turns out that the purpose of your trip related to 2 or more reasons you might then have to apportion.

 

What about after settlement but before the property is available for rent? Fly up and install some new blinds, fix a door and then fly back? Can these travel expenses (flights, car hire, etc) be added as a capital cost?

 

I don't think so as it doesn't relate to any of the 5 elements of s110-25 ITAA97.

 

As the purpose is to inspect the purchase, not say to inspect to see how agent is managing tenants, then it would be a capitalised expense.

 

Thanks Greyghost, could you please elaborate more on capital cost and capitalised expense? What are the differences from the tax perspective?

 

It would be added to one of the elements of the cost base.
In simplest terms. Purchase price + stamps + travel costs = basic cost base