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Rental properties – travel expenses

From 1 July 2017, travel expenses relating to a residential investment property are not deductible.

A residential premise (property) is land or a building that is:

  • occupied as a residence or for residential accommodation
  • intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation.

Under the new legislation, you are no longer able to claim any deductions for the cost of travel you incur relating to a residential rental property unless you are carrying on a business of property investing or are an excluded entity.

Travel expenditure can also not be included in the cost base for calculating your capital gain or capital loss when selling a property.

In the business of property investing

Owning one or several rental properties will not be considered being in the business of rental properties.

The receipt of income by an individual from the letting of property to a tenant, or multiple tenants, will not typically amount to the carrying on of a business as such activities are generally considered a form of investment rather than a business.

Excluded entities

An excluded entity is a:

  • corporate tax entity
  • superannuation plan that is not a self-managed superannuation fund
  • public unit trust
  • managed investment trust
  • unit trust or a partnership (all of the members of which are entities of a type listed above)

Example: An individual with residential investment property in 2017-18

Sarah rented out her residential rental property 2017-18. She travelled to the property to repair damages caused by tenants during the year.

As the investment is a residential property, Sarah cannot claim travel expense.

Example: An excluded entity in 2017-18

Terry’s Tyres incurred travel expenses in 2017-18.  The property manager was tasked with inspecting a residential property investment that is currently tenanted. Terry’s Tyres is a corporate tax entity and can claim a deduction for rental travel costs.

For further information on what deductions can be claimed for rental properties, please download Griffin & Associates rental property checklist.

Source: Australian Taxation Office

Griffin & Associates

79 Denham St, Townsville City QLD 4810

Phone 07 4772 6588

Chartered Accountants