In short, the answer to the above question is yes if actively letting residential rental properties is your business and that you have pursued the said business post 1 July 2017. In addition, Companies, superannuation funds (not SMSFs, however), public unit trusts, and managed investment trusts are still allowed to claim travel deductions for any costs related to the upkeep and management of their residential rental properties.
The owners of commercial properties and commercial residential properties – like hostels, boarding houses, and bed and breakfasts – also still qualify to claim rental business-related travel deductions.
The flip side of this coin is that passive property investors are no longer eligible for travel expense claims dating from 1 July 2017. Note that partnerships and trusts also qualify as passive property investors. This includes travel for the purpose of:
Rent collection
Property maintenance
Conducting inspections
Attending body corporate meetings
As well as any costs associated with taxi or vehicle hire, airfares, public transport, meals, and accommodations.
There are exemptions to the new regulations for passive property investors who own three or more residential rental properties and who actively participate in the management and upkeep of their investment properties.
Furthermore, if you can make a strong enough case regarding the letting of your residential rental properties being your business, you may just be eligible to claim expenses for related activities like:
Self-education
Professional courses and seminars
Research
Associated running costs
Is it a rental property business? A case study
Let’s examine the case of the Smiths. They own eight houses and three apartment blocks which each comprise six residential units, making a total of 26 properties. The Smiths actively manage all the properties and spend an appreciable amount of time – on average 25 hours per week each – to doing so.
What’s more, they handle all financial and decision making relating to their properties. They interview all prospective tenants, collect all the rents, and conduct regular property inspections. They also attend to all the regular maintenance and repairs or arrange for them to be carried out on their behalf.
Besides an income that Mr. Smith earns from his investment shares, the Smiths have no additional source of income. Add to this the fact that the Smiths are running a rental property business, a fact which is demonstrated by:
According to this agreement, Mrs. Smith is entitled to 75% of the partnership profits or losses and Mr. Smith is entitled to 25% of the partnership profits or losses. As the Smiths are conducting a rental property business, the net profit or loss generated is split between them based on their partnership agreement despite their legal share in the rental properties being equal, that is 50-50.
What now?
Want to know if you can continue to claim travel expenses relating to the upkeep and management of your residential rental properties? SMART Business Solutions is here to help you navigate the tax regulations governing travel costs associated with your rental property activities.
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