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Ruling

Subject: Rental property deductions

Question

Are you entitled to a deduction for travel expenses incurred to attend monthly meetings and annual general meetings?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

You own a rental property that is part of a strata complex.

You are a member of the Council of Management (the council) for the strata complex.

You attend meetings once a month which are held in the same strata complex as your property (in other council members' properties).

All business relating to the strata complex is conducted at these meetings; this includes any issues raised by property owners, by laws etc. Various decisions are also voted on at these meetings. As a property owner you have voting rights at these meetings.

As a member of the council you are required to perform duties and bring forward various issues at the meetings.

You also attend Annual General Meetings (AGM) once a year. These are held in a location near the strata complex. These meetings are more formalised, however, the business conducted at these meetings is similar to that of the monthly meetings. You also have voting rights at the AGMs.

Your participation as a member on the council is voluntary.

You are not paid to attend these meetings.

You have incurred travel expenses to attend these meetings. The travel relates solely to the meetings and you do not conduct any private activities when travelling to or from the meetings.

Relevant legislative provision

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature.

Taxation Ruling IT 39 considers the deductibility of expenditure incurred in servicing or managing income producing investments.  IT 39 states that where expenditure is incurred in 'servicing' an investment portfolio (such as consulting with inter-state stock brokers and attending inter-state stock exchanges), the expenditure should properly be regarded as incurred in relation to the management of income producing investments and thus as having an intrinsically revenue character.

ATO Interpretive Decision ATO ID 2002/948 considers a taxpayer who has an investment portfolio that includes a shareholding in a company.  The taxpayer earns dividend income from their shareholding in the company.  The taxpayer intends to incur travel expenses to attend the AGM for the company.

The travel expenses incurred by the taxpayer in attending the company AGM are costs incurred in servicing their investment portfolio. If the travel relates solely for the purpose of attending the AGM, the taxpayer will be entitled to a deduction under section 8-1 of the ITAA 1997 for the cost of that travel.

In your case, you own a rental property that produces rental income. You incur travel expenses to attend monthly meetings and annual general meetings for the council of the strata complex. You are a member of the council and you are required to attend to perform duties. You are not paid in your position on the council.

You attend the meetings in your capacity as a member of the council which is voluntary and not sufficiently connected to your rental income. However, your participation on the council is consequential to you owning a property in the strata complex. Your primary reason for attending the meetings is considered to be your interest as a property owner. You have voting rights in relation to decisions that affect the strata complex and you exercise these rights at the meetings. As a property owner you are considered to be servicing your investment by attending these meetings.

The travel expenses you have incurred to attend the meetings have a sufficient connection to your rental income. Therefore, you are entitled to a deduction for travel expenses under section 8-1 of the ITAA 1997.