Assistant commissioner at the Australian Taxation Office (ATO), Kath Anderson has told property investors to take extra care this year. “The ATO has already identified 26,000 taxpayers who have claimed deductions for travel to rental properties despite recent changes to tax laws,” she explained.

As of 1 July 2017, property investors are unable to claim travel expenses associated with inspecting, maintaining or collecting rent from a residential rental property unless they are business related.

From 1 July 2017, investors cannot claim travel expenses relating to inspecting, maintaining or collecting rent for a residential rental property as deductions, unless they are carrying on a rental property business or are an excluded entity such as:

  • Corporate tax entities (companies, corporate limited partnerships, corporate unit trusts, and public trading trusts)

  • Superannuation plans that are not a Self-Managed Superannuation Fund (SMSF),

  • Public unit trusts

  • Managed investment trusts or

  • Unit trusts or partnerships, all of the members of which are entities of a type listed above.

The denial of travel expense deductions applies only to residential premises that are being used by the tenant as a place to live. It follows that deductions are still permitted for travel to:

  • Residential premises that you own that are being used by the tenant for business purposes (e.g. a house that has been re-fitted into a psychiatrist’s practice, doctor’s surgery etc.)

  • Mixed-use premises (e.g. 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).

Additionally, 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). Indeed, where your travel expenses are significant, you may now wish to consider engaging the services of these other parties.

Anderson is urging all property investors to check their tax status.

“Rental property investors should check if they fall into one of these exceptions before they lodge and claim for rental travel. If they have already lodged and made a mistake, we encourage them to lodge an amendment.”

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