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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1012899280558

Date of advice: 22 October 2015

Ruling

Subject: Travel expenses

Question

Is a deduction allowed in relation to the travel expenses?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2016

The scheme commences on:

1 July 2015

Relevant facts and circumstances

You have purchased a new residential unit.

You would like to visit the complex for a final inspection, hold meetings with the property managers and meet with some of the local real estate agents.

Costs incurred will include flights, accommodation, meals and some incidental costs may also be incurred.

Relevant legislative provisions

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, or relate to the earning of exempt income.

Generally, the cost of travel by a taxpayer to inspect or maintain rental properties is an allowable deduction under section 8-1 of the ITAA 1997 as it has been incurred in the course of gaining income from the investment property.

However, the costs associated with setting up a rental property are generally not deductible, as, they form part of establishing the profit-making asset, that is, they are capital in nature.

Our fact sheet entitled Rental properties - claiming travel expenses deductions advises the following:

    You can claim travel expenses for:

    • preparing the property for new tenants (except for the first tenants);

    • inspecting the property during or at the end of tenancy;

    • undertaking repairs, where those repairs are because of damage or wear and tear incurred while you rented the property out;

    • maintaining the property, such as cleaning and gardening, while it is rented or available for rent;

    • collecting the rent; and

    • visiting your agent to discuss your rental property.

The fact sheet clearly states that travel expenses incurred when you are preparing the property for your first tenants are not allowed as a deduction.

In your case, the travel expenses are to visit the property for a final inspection, hold meetings with the property managers and meet with some of the local real estate agents. These costs are incurred to establish the profit-making asset and are therefore capital in nature and not deductible under section 8-1 of the ITAA 1997.


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