Private ruling: Rental property expenses
Published: December 2013
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to a deduction for your portion of car hire expenses incurred to inspect your rental properties? | A1: Yes, however where there is also a private purpose for the travel you may be required to apportion your expenses.

Relevant facts and circumstances: You own rental properties. You flew to the capital city closest to your rental properties where you hired a rental car to drive to inspect one of the properties. You stayed overnight then drove back to inspect another rental property. You incurred expenses in hiring the car including petrol expenses.

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. 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. In your case, you incurred expenses in hiring a car to inspect your rental properties. Accordingly, you are entitled to a deduction for your portion of the expenses under section 8-1 of the ITAA 1997. | Detailed Reasoning - Apportionment of travel expenses: Where travel related to your rental property is combined with a holiday or other private activities, you may need to apportion the expenses. If you travel to inspect your rental property and combine this with a holiday, you need to take into account the reasons for your trip. If the main purpose of your trip is to have a holiday and the inspection of the property is incidental to that main purpose, you cannot claim a deduction for the cost of the travel. However, you may be able to claim local expenses directly related to the property inspection and a proportion of accommodation expenses.