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Edited version of your private ruling
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Ruling:
Subject: Deductions in relation to rental expenses
Question 1
Are you entitled to a deduction for the rent and electricity incurred in relation to the property that you rented in City A?
Answer
Yes.
Question 2
Are you entitled to a deduction for the holding and running costs incurred in relation to the property you purchased in City A?
Answer
Yes.
Question 3
Are you entitled to a deduction for capital works for the property you purchased in City A?
Answer
No.
This ruling applies for the following periods
Year ended 30 June 2010
Year ended 30 June 2011
Year ended 30 June 2012
The scheme commenced on
1 July 2009
Relevant facts
Your primary residence, family and electorate are in a regional area.
As a Member of Parliament, you are required to be in the capital city where the Parliament sits (City A) for a substantial part of the year.
For a period you rented a property in City A that you used for overnight accommodation whilst undertaking work in City A. You incurred rent and electricity expenses.
Later you decided to purchase a property to use for overnight accommodation whilst undertaking work in City A. You incurred expenses such as interest on borrowings, rates, insurance, and maintenance on the property. The property was constructed before 1979.
Both properties were only used by you and only when you were working in City A and not for any other reason.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Division 40
Income Tax Assessment Act 1997 Division 43
Reasons for decision
Taxation Ruling TR 1999/10 outlines allowances, reimbursements, donations and gifts, benefits, deductions and recoupments of Members of Parliament.
Paragraph 1, in part, states the ruling applies to Members of the Commonwealth House of Representatives.
Paragraph 328 states a Member may choose to rent or buy a property rather than stay in a hotel or other commercial establishment when travelling. A deduction is allowable for expenses, which are not of a capital, private or domestic nature, in respect of such a property where:
(i) it is used by a Member for accommodation when he or she is undertaking work-related travel involving an overnight stay away from home; and
(ii) the property is not regarded as a second residence.
Such expenses include: lease payments; rent; interest on borrowings used for the acquisition of the property; rates; taxes; insurance; general maintenance of the building, plant and grounds. A deduction is also allowable for depreciation of plant used in connection with such a property.
In your case you are a Member of Parliament. You rented a property in City A for a period. The property was used by you for accommodation when you were undertaking work-related travel involving an overnight stay away from home. The property is not regarded as a second residence as you only used it while you were in City A undertaking work-related travel. You are therefore entitled to claim a deduction for rent and electricity.
Later you chose to buy a property rather than continuing to use rented accommodation. The property is used by you for accommodation when you are undertaking work-related travel involving an overnight stay away from home. The property is not regarded as a second residence as you only use it while you are in City A undertaking work-related travel. You are therefore entitled to claim a deduction for expenses such as holding and running costs.
Subsection 43-20(1) of the ITAA 1997 states this Division applies to capital works being a building, or an extension, alteration or improvement to a building:
· begun in Australia after 21 August 1979; or
· begun outside Australia after 21 August 1990.
In application to your case your property was constructed before 1979. Therefore, Division 43 of the ITAA 1997 does not apply.