Edited version of private advice

Authorisation Number: 1052313807757

Date of advice: 3 October 2024

Ruling

Subject: Deductions - travel expenses

Question

Are you able to claim a deduction for travel expenses incurred in relation to your travel to the rental property located in City Z under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20YY

The scheme commenced on:

1 July 20YY

Relevant facts and circumstances

You live in City Y.

You have a rental property in City Z.

You are not in the business of renting properties.

Your rental property is an investment property.

The rental property was available for rent.

A cyclone hit City Z prior to you securing a tenant.

You were not able to hire cleaners in City Z to clean the rental property due to their unavailability.

You incurred expenses with airfares and taxis getting to and from the rental property in City Z to make the property available for habitation after the cyclone to potential tenants.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Section 8-1 of the ITAA 1997 allows you to claim a deduction for a loss or outgoing that is incurred in gaining or producing your assessable income, or necessarily incurred in carrying on a business to gain or produce assessable income. These deductions are limited by the exclusion of losses or outgoings that are capital, private or domestic in nature.

Under the previous legislation, the full cost of travel to inspect or maintain a rental property had been an allowable deduction under section 8-1 of the ITAA 1997 if the sole purpose of the travel had been incurred in connection with gaining income from the investment property.

The Treasury Laws Amendment (Housing Tax Integrity) Act 2017 received royal assent on 30 November 2017 to disallow any deductions for cost of travel you incur relating to a residential rental property. The application of the amendment applies to a loss or outgoing incurred and is effective from on or after 1 July 2017.

Section 26-31(1) of the ITAA 1997 states you cannot deduct a loss or outgoing you incur after 1 July 2017 if:

•         it is related to travel,

•         it is incurred in gaining or producing your assessable income from the use of residential premises as residential accommodation, and

•         it is not necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.

Under the new legislation you are no longer able to claim any deductions for the cost of travel you incur relating to a residential rental property unless you are carrying on a business in property investing or are an excluded entity.

In your case you are not in the business of renting properties.

Your rental property in City Z is an investment property.

You incurred expenses traveling to City Z to the rental property from your home in City Y to do a clean up after a cyclone.

You incurred expenses on airfares and taxis getting to and from the rental property in City Z due to cleaners not being available.

The rental property did not have a tenant at the time of the cyclone hitting City Z.

You needed to clean the rental property as soon as possible so you were able to secure a tenant.

As you are not in the business of renting properties and your rental property in City Z is an investment property you are not entitled to a deduction for your travel expenses to and from City Z to do the clean up.

These expenses are considered to be private and domestic in nature.

The Commissioner is not able to allow these expenses to be deductable due to your circumstances.

There is no discretion under the legislation that allows the Commissioner to take into consideration personal circumstances.

The Australian Taxation Office (ATO) does not make the laws Parliament makes the laws and the ATO administers the legislation.