Due to recent changes to legislation, property investors can no longer claim rental property travel expenses incurred while inspecting, maintaining or collecting rent from rental properties. New legislation was introduced from the 1st of July 2017 as part of the housing affordability measures, and affects Australia’s 2 million landlords, of which around 1.3 million are negatively geared.
“This is an integrity measure to address concerns that many taxpayers have been claiming rental property travel expenses without correctly apportioning costs or have claimed travel costs that were for private travel purposes,” the budget papers say.
In this article, we cover:
Rental property travel expenses that can no longer be claimed as a deduction
- 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 renting 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.
If you are an excluded class of entity or are carrying on a business for the purposes of gaining or producing assessable income, you are exempt from the new rules.
The Australian Taxation Office (ATO) considers an ‘excluded class of entity’ as:
- a corporate tax entity
- a superannuation plan that is not a self-managed superannuation fund
- a public unit trust
- a managed investment trust
- a unit trust or a partnership, members of which are entities of a type listed above
What you need to know
- You can still claim a deduction for the cost of employing other parties to carry out tasks on your behalf (such as Real Estate Agents for carrying out property management services such as inspections, or tradespeople for carrying out repairs)
- The denial of rental property travel expenses applies only to residential premises that are being used by the tenant as a place to live (i.e. property investors). It does not affect:
- residential premises that you own that are being used by the tenant for business purposes (for example, a house that has been re-fitted into a psychiatrist’s practice, doctor’s surgery, etc
- mixed-use premises (for example, where there is a convenience store downstairs and living quarters upstairs, but only for that part of the travel in relation to the convenience store)
- commercial premises (e.g. you are the landlord of a bakery or other commercial property)
- if you are in the ‘business of property’ as opposed to being a ‘property investor’.
To read more about the new depreciation legislation and how this applies to a range of property investment scenarios, download our comprehensive white paper document – Essential facts: 2017 Budget changes and property depreciation visit bmtqs.com.au. Alternatively, for obligation free advice contact the expert team at BMT Tax Depreciation on 1300 728 726.