Since 2017, the rules surrounding property travel expense claims have been different for residential and commercial properties.
In the case of residential rental properties, you can almost always assume that your travel expenses are not a claimable tax deduction.
As stated by the ATO, travel expenses relating to inspecting, maintaining, or collecting rent for a residential rental properties cannot be claimed as deductions by investors. The travel expenditure is also not recognised in the cost base of the property for CGT purposes.
However, if you own commercial property and are deemed to be “in the business of letting rental properties”, the expenses for inspecting, maintaining, or collecting rent could be deductible.
How can you know if you are the owner of a residential property or “in the business of letting”?
Generally, owning one or several rental properties will not be considered being in the business of letting rental properties.
If you are an individual and you receive income from letting property to a tenant, or multiple tenants, you are not typically carrying on of a business of letting rental properties. The ATO will consider your activities to be a form of investment rather than a business, so you can’t claim deductions for travel expenses.
You can claim travel expenses, if you’re 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.
What is considered to be a travel expense?
Even if you are able to claim travel expenses, there are only certain expenses you can claim. Some of these include:
- 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 you rented 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.
Under no circumstances can you claim expenses such as:
- your personal use of the property or for purely private purposes
- carrying out general maintenance of the property while it’s not genuinely available for rent
- undertaking repairs, where those repairs are not because of damage or wear and tear incurred while you rented out the property (for example, if you travel to undertake initial repairs before you rent the property for the first time, these are capital expenses and may be included as part of the cost base for capital gains tax calculation when the property is being sold later).
Remember that, in order to claim anything, you need to keep your receipts and a log book or other record if claiming cents per kilometre.
If you need any assistance with your tax affairs, you can contact one of our tax champions on 1300 4 PARIS.