Travelling to and from your investment property

From 1 July 2017, new rules came into effect that prevent taxpayers claiming a deduction for expenses they incur travelling to and from their residential investment property.

The Government restricted travel deductions to curb “widespread abuse around excessive travel expense claims relating to residential investment properties….This will stop residential property investors from using the tax system to pay for their holidays by claiming costs as a rental expense.”

The new rules prevent a deduction from being claimed for a loss or outgoing if it relates to travel and the expense is incurred in gaining or producing assessable income from the use of residential premises as residential accommodation.

There are some exceptions to these changes.

Firstly, the rules will not prevent a deduction from being claimed if the expense is necessarily incurred in carrying on a business. This means that if you carry on a business of renting properties, you can continue claiming travel deductions if you carry on a business of property investing or a business of providing retirement living, aged care, student accommodation or property management services.

The distinction between someone merely investing in property and someone carrying on a business of property investing is a matter of fact. The ATO will look at the characteristics of the business including:

·  The total number of residential properties that are rented out

·  The average number of hours per week you spend actively engaged in managing the rental properties

·  the skill and expertise exercised in undertaking these activities, and

·  whether professional records are kept and maintained in a business-like manner.