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Edited version of your written advice
Authorisation Number: 1051442545829
Date of advice: 22 October 2018
Ruling
Subject: Transportation/travel expenses for a residential rental property
Question 1
Are you able to claim transportation/travel expenses for the removal of garbage and to provide supplies to your rental property for the 2017 income tax year?
Answer
Yes
Question 2
Are you able to claim transportation/travel expenses for the removal of garbage and to provide supplies to your rental property for the 2018 income tax year?
Answer
No
This ruling applies for the following periods
Year ending 30 June 2017
Year ending 30 June 2018
The scheme commenced on
1 July 2016
Relevant facts and circumstances
You have been providing student rental accommodation since 20XX.
You drive to this property weekly to remove excess garbage and transport back to your private residence to put in your bins.
You buy supplies and transport these and other bulky items you purchase for the students as they lack transportation.
You buy toilet paper, paper towel, laundry detergent, dishwashing liquid, dishwasher powder, cleaning materials, bowls, tubs, light bulbs and tissues.
You intermittently buy clothes dryers, refrigerators, microwaves, ovens, toasters, jugs, cutlery, crockery, pots and pans, bedroom furniture and bedding.
These are services you offer the students that live in the accommodation.
There are xx students living in the accommodation and the garbage they produce is in excess of what will fit in the normal bins provided by the Council, as this is classed as a normal house dwelling and they will not provide extra services.
You keep travel diaries regarding the trips you do for these services.
You account for the rental income in your individual tax return not through the partnership.
The accommodation is rented at above normal commercial rates because of the services you offer that require transportation.
You are not running a business and the property you own does not pass the active asset test.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Section 26-31
Reasons for decision
Detailed Reasoning
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.
Under the new legislation (Section 26-31(2) of the ITAA 1997), from 1 July 2017 you are no longer able to claim any deductions for the cost of travel you incur relating to a residential rental premises unless you are carrying on a business of property rental or are an excluded entity.
An excluded entity is a:
● corporate tax entity
● superannuation plan that is not a self-managed superannuation fund
● public unit trust
● managed investment trust
● unit trust or a partnership, all of the members of which are entities of a type listed above.
A residential premise (property) is land or a building that is:
● occupied as a residence or for residential accommodation
● intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation.
As with prior years, the travel expenditure cannot be included in the cost base for calculating your capital gain or capital loss when you sell the property.
Generally, owning one or several rental properties will not be considered being in the business of renting properties.
The receipt of income by an individual from the letting of property to a tenant, or multiple tenants, will not typically amount to the carrying on of a business as such their activities are generally considered a form of investment rather than a business.
Therefore, based on the above information you are entitled to a deduction for travel expenses in relation to your rental property for the income tax year 1 July 2016 to 30 June 2017 but not for the income year 1 July 2017 to 30 June 2018 going forward, as per the new legislation, as you are not carrying on a business of property investing.