Denying travel claims to investment property owners
Seems the Federal Government couldn’t help itself in having a go at residential property investors in the recent federal budget. It is proposed that property investors will no longer be able to claim travel expenses for inspecting their properties. With over 20 years of experience in preparing tax returns for residential property investors, we can honestly say that there was very little mischief in this area by tax payers. Those taxpayers with property interstate would present us with airfares and accommodation expenses for when they would either conduct a routine inspection of the property or visit the property to oversee major repairs. If then a taxpayer chose to stay more days than were required, their travel claims were apportioned so as to claim only the portion associated with the investment activity. In all our experience we have never seen taxpayers insist that they want to claim the whole cost of the travel, if there was a private use element.
The government says this measure will generate an additional $ 800 million in revenue over 4 years.
For most landlords this measure is not a major loss, given that most investors buy property within the state they live in, and hence their travel expenses mainly revolved around claiming a certain rate per kilometre travelled to inspect the property.
Eg. If an investor travelled 100kms in the year to inspect the property, then they could claim a tax deduction of $ 66. That $ 66 translates into a tax saving of between $ 13 to $ 31, depending on what tax bracket you sit on.
We at Vantage view this change as somewhat petty. It essentially punishes every property investor for the actions of the minority who may choose to exploit the claim. If the travel claim was so highly exploited, then perhaps the ATO should focus on those they believe are doing the wrong thing. It’s not that difficult in reality because property travel claims have their own specific label in the tax return, so this data is easily identifiable by the ATO, and they could quite simply issue a “please explain” for any travel claim over a certain amount in say 2 consecutive years.
Despite the above, the upside in our opinion is that if this is the extent of the governments attack on negative gearing, then we’ll gladly accept it.