Travelling to Inspect Your Rental Property? Pause before you go

Did you know that for the financial year ending 30 June 2015, rental property travel expenses claimed by individual taxpayers amounted to approximately $450 million? So it’s not surprising to see some reform with respect to these claims!

As of 1 July 2017 landlords are no longer able to claim a tax deduction for travel costs associated with residential rental properties. Nor will travel costs be allowed or recognised in the cost base of the property for Capital Gains Tax purposes on sale.

This exclusion applies to the costs of attending inspections, maintaining the property and attending a strata meeting whether you travel by your own car, taxi, public transport, or even an airplane. You also cannot claim the lunch you had when you attending the meeting with your property manager or the money you spent in a motel for your trip to repair the property.

Not all taxpayers are impacted

While this change does impact the typical “mum and dad” investor, it will not apply to entities that are carrying on a business of “letting rental properties”. This includes providing retirement living, aged care, student accommodation or property management services.

Institutional investors are also excluded from this change, and will continue to be allowed a travel deduction. Examples of these types of investors include corporate tax entities, superannuation plans that are not SMSFs, public unit trusts, managed investment trusts, or partnership or unit trusts if all members of the partnership or trust are entities included on this list.

Moreover, the change in legislation will not prevent an investor from claiming a deduction where a property has a dual purpose. Examples of a dual purpose include where the property is both a commercial and a residential premises. In this instance, travel costs will need to be apportioned between deductible expenditure and non-deductible expenditure.

Not all is lost – other rental property expenses still remain deductible

While many investors have lost a deduction with this change, fortunately there are still a number of expenses for your rental property you may be able to claim! Some examples include:

• Advertising for tenants
• Body corporate fees and charges
• Council rates
• Water charges
• Land tax
• Interest on loans
• Cleaning
• Gardening and lawn mowing
• Pest control
• Insurance (building, contents, public liability)
• Agent fees and commissions

Knowing which deductions you can and can’t claim can be a minefield if you’re not in the know. Thankfully experts like the accounting team at The Hopkins Group are on your side, to help you make the most out of your tax return. To get up to date advice on what deductions may be available to you, contact an accountant today.

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Disclaimer: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances.