From 1 July 2017, travel expenses relating to inspecting, maintaining, or collecting rent for a residential rental property cannot be claimed as deductions by investors or SMSFs. The changes are now law. The travel expenditure is also not recognized in the cost base of the property for CGT purposes.
You can continue to deduct travel expenditure if:
- the losses or outgoings are necessarily incurred in carrying on a business for the purposes of gaining or producing assessable income; or
- you are an excluded class of entity.
An excluded class of entity is:
- a corporate tax entity;
- a superannuation plan that is not a self-managed superannuation fund;
- a public unit trust;
- a managed investment trust; or
- a unit trust or a partnership, members of which are entities of a type listed above.
By disallowing travel expenditure incurred by individual investors it is thought to combat the ‘widespread abuse around excessive travel expense claims relating to residential investment properties’ in order to ‘improve the integrity of the tax by addressing the systematic risk of excessive and incorrect claims for travel expenses associated with residential investment properties’.