From 1 July 2017, travel expenses relating to inspecting, maintaining, or collecting rent for a residential rental property cannot be claimed as deductions by investors. However there are some exemptions. The travel expenditure is also not recognised in the cost base of the property for Capital Gains Tax (CGT) purposes.
Under the new legislation, you are no longer able to claim any deductions for the cost of travel you incur relating to your residential rental property, unless the expenses were incurred:
- for commercial rental properties
- by excluded entities, or when carrying on a rental property business.
Travel expenses include:
- preparing the property for new tenants (except for the first tenants)
- inspecting the property during or at the end of tenancy
- undertaking repairs, where those repairs are because of damage or wear and tear incurred while you rented out the property
- maintaining the property, such as cleaning and gardening, while it is rented or genuinely available for rent
- collecting the rent
- visiting your agent to discuss your rental property.
Travel expenses don’t include:
- your personal use of the property or for purely private purposes
- carrying out general maintenance of the property while it is not genuinely available for rent
- undertaking repairs, where those repairs are not because of damage or wear and tear incurred while you rented out the property (for example, if you travel to undertake initial repairs before you rent the property for the first time, these are capital expenses and may be included as part of the cost base for capital gains tax calculation when the property is being sold later).
The ATO has advised that, where a taxpayer has already incorrectly claimed deductions for the cost of travel to and from their property in their 2018 tax return, they will need to request an amendment.
If you have a query regarding the above or need further information, please contact one of our accountants on (02) 9223 9166 to discuss. Alternatively, you can submit an online enquiry form.