| This edited version of the Compendium of Comments is not intended to be relied upon. It provides no protection from primary tax, penalties, interest or sanctions for non-compliance with the law. |
This is a compendium of responses to the issues raised by external parties to draft LCR 2018/D2: Residential premises deductions: travel expenditure relating to rental investment properties
This compendium of comments has been edited to maintain the anonymity of entities that have commented.
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Summary of issues raised and responses
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| Issue No. |
Issue raised |
ATO Response/Action taken |
| 1 |
The Ruling would offer more certainty if it specified the minimum number of properties that must be held before the other indicia of carrying on a business are considered. |
There is no 'bright line' test in determining whether a taxpayer is carrying on a business of property investing. Specifying a number would incorrectly suggest that this factor is the most important or the only factor to consider. It detracts from the importance of the other factors. |
| 2 |
A flowchart outlining the interaction between sections 8-1 and 26-31 of the Income Tax Assessment Act 1997 (ITAA 1997) would be helpful. |
An expense that satisfies the positive and negative limbs of section 8-1 of the ITAA 1997 is deductible, unless it is expressly excluded under another provision. We do not see how a flowchart would express this concept more clearly. |
| 3 |
The Ruling should set out what travel expenses include/does not include, for example, toll charges, parking fees, meals and accommodation. |
Example 2 in the final Ruling has been amended to cover airfares, meals, accommodation and taxi fares. These types of expenditure are also referred to in the rental properties guide 2018 and at [1.21] of the Explanatory Memorandum (EM). |
| 4 |
Additional real examples would assist taxpayers. |
There are two examples in the rental properties guide 2018 and a further two examples on the ATO webpage titled 'Rental properties - travel expenses' (QC 22093). We consider that these examples along with the examples provided in the final Ruling cover basic scenarios and will assist taxpayers in understanding the law. |
| 5 |
There is confusion over what a residential property used for commercial purposes means. |
Two examples are given in the EM, being hotels and boarding houses. |
| 6 |
The date of effect of the Ruling should be extended. |
The Ruling interprets the law that is currently in force. Section 26-31 of the ITAA 1997 took effect from 1 January 2018 and applies to a loss or outgoing incurred on or after 1 July 2017. |
