Private ruling: Travel and accommodation for rental property
Published: January 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you eligible to claim a deduction for travel and accommodation expenses incurred to attend to the maintenance of your rental property? | A1: Yes.

Relevant facts and circumstances: You are the sole owner of a rental property in Australia and currently work overseas. You have been advised that there has been damage and wear and tear over a period of time caused by long term tenants of the property. The sole reason for your return to Australia will be to attend to the repairs and maintenance on the property. The current tenant has been in the property for X years, and the degree of repairs and maintenance which are needed was brought to your notice late last year. You will use commercial accommodation while attending to the property. You will be travelling alone and estimate you will need at least a week to 10 days to assess the work needed and to organise tradespeople. The only activities during this period will be to assess the degree of damage and see what repairs/maintenance is required on the property and organise tradespeople to perform any of the major work during your stay, as well as to organise any work which will be done after you leave. You may also have to attend to potential insurance claims and organise to re let the property.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1

Reasons for decision: Summary: 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, or a provision of the ITAA 1997 prevents it. 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. To determine whether your expenses are deductible, the essential character of the expenditure must be considered. It is necessary to determine whether there is a sufficient nexus between the expenditure and your current income earning activities. The intention or purpose in incurring an expense can be an element in determining whether the whole or part of the expense is an allowable deduction. The words 'to the extent to which' signify that an expense may be apportioned if it is only partly incurred to produce assessable income. In Ronpibon's case , the High Court expressed the view that '... there are at least two kinds of items of expenditure that require apportionment'. These were generally: those items that are capable of dissection; and those that cannot be dissected but should be apportioned on the basis that they serve more than one object indifferently. The latter would clearly apply to an airfare purchased for both work and private purposes ( Case R13 84 ATC 168; 27 CTBR (NS) Case 64). If the travel was undertaken equally for income earning purposes and for private purposes the expenses would be apportioned equally. In your case, you will incur expense in travelling from overseas solely to inspect and organise repairs to your rental property. Accordingly, these will be deductable under section 8-1 of the ITAA 1997.