A recent Tax Wrap podcast discussed the changes made to deduction options open to investment property owners, in particular the deduction of travel expenses that until relatively recently were available to landlords when making inspections of a property or to make repairs to that property.
Avid podcast listener Neal, who hails from Canberra, writes: “I refer to Tax Wrap 156, ‘Investment Property Owners Face a Shake-up’, which aired on 25 January 2018. I understand the recently introduced changes to residential investment property deductions as they relate to travel to inspect a property, BUT I can find nothing to clarify if travel to the Annual General Meeting of the Body Corporate of an apartment block in which I own a unit, would be allowed as a deduction.
“In my case, I live in the ACT but my investment apartment is in Brisbane. There are matters on the agenda for the forthcoming AGM on which I wish to raise some queries and concerns, so I am planning to attend the AGM.
“Do you think that I would be able to deduct some of the costs of travelling Canberra-to-Brisbane and return if the sole purpose of the travel is to attend the AGM of the body corporate?”
The ATO website states: “From 1 July 2017, travel expenses relating to a residential investment property are not deductible.”
But Neal’s question is understandable, as the changes were stated as not affecting entities in the course of carrying on a business. Early in the legislation is the following statement: “The amendments … do not affect deductions for travel expenditure incurred in carrying on a business, including where an entity carries on a business of providing property management services.”
However, not far below this statement comes paragraph 1.22 (scroll down when in the link above). When drafting the legislation, the government seems to have put some thought to scenarios like Neal’s.
The paragraph says: “The travel is not restricted to travel to the relevant property. For example, travel undertaken to attend an apartment building owner’s corporation meeting or visit a real estate property manager to discuss the property is also not deductible.”
Clearly it is intended that “investment in” and “in the business of” are not the same thing when it comes to eligibility or otherwise of property-related deductions.