| Disclaimer This edited version has been archived due to the length of time since original publication.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: 1013072877243
Date of advice: 18 August 2016
Ruling
Subject: Travel expenses
Question 1
Is the super fund entitled to claim a deduction for travel, food and accommodation expenses incurred by the trustees to inspect a rental property owned by the fund?
Answer
Yes.
This ruling applies for the following period:
Year ending 2017
The scheme commences on:
1 July 2016
Relevant facts and circumstances
The Super fund is a complying self-managed super fund (SMSF).
The Super fund owns a rental property.
The trustees of the super fund want to travel to inspect the property owned by the SMSF and meet with the property manager and building manager.
The SMSF will pay for all expenses incurred in relation to the rental property, not the trustees.
Relevant legislative provisions
Income Tax Assessment Act 8-1
Superannuation Industry (Supervision) Act 1993
Further issues for you to consider
You will be required to keep evidence of the expenses incurred by the SMSF when travelling to provide to your SMSF auditor as part of the annual compliance process.
You must not pay for the expenses yourself and then pay yourself back with funds from the SMSF as this will be considered a breach of the Superannuation laws and considered as a loan to a member - Superannuation Industry (Supervision) Act 1993 section 65.
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for all outgoings to the extent to which they are incurred in gaining or producing assessable income, or are necessarily incurred in carrying on a business for that purpose. However, a deduction is not allowable for outgoings that are of a capital, private or domestic nature.
Rental property expenses are deductible under section 8-1 of the ITAA 1997 for the period the property is rented or is available for rent. Generally, the cost of travel to inspect or maintain a rental property is an allowable deduction under section 8-1 of the ITAA 1997 as it has been incurred in connection with gaining income from the investment property.
Where an overnight stay is involved, you are entitled to claim for travel, meals and accommodation and where no overnight stay is involved, no deduction is allowable for meals. Where travel related to your rental property is combined with a holiday or other private activities, a deduction is only allowable for a portion of the expense.
Expenses incurred by a SMSF and the deductibility of these expenses are outlined in Taxation Ruling 93/17. Expenditure of a superannuation fund, which is not of a capital, private or domestic nature, is deductible under section 8-1 to the extent that:
(a) It has the essential character of an outgoing incurred in gaining or producing assessable income; or
(b) It has the character of an operating or working expense of a business or is an essential part of the cost of the fund's business operations.
In your case, you are travelling as a trustee for the primary purpose of inspecting the property, meeting with the property and building manager of the property which is owned by the SMSF. Therefore, these expenses will be deductible to the SMSF under 8-1.
The receipts for the expenses must be in the name of the SMSF and a copy of these receipts will be required to meet substantiation requirements.