If you travel to inspect or maintain your property or collect the rent, you may be able to claim the costs of travelling as a deduction. You are allowed a full deduction where the sole purpose of the trip relates to the rental property. However, in other circumstances you may not be able to claim a deduction
or you may be entitled to only a partial deduction.
The old wives' tale of claiming two trips per year is hogwash. You can claim as many trips as you like so long as the purpose of the trip is to inspect the property and you don't tag a family holiday onto it.
Michael makes a number of visits to his rental property in order to
inspect it and to carry out minor repairs. He travelled 222 km during
the course of these visits.
On the basis of a cents-per-kilometre rate of 75 cents for his 2.8 litre car, Michael can claim the following deduction:
Distance travelled × rate per km = deductible amount
222 km × 75 cents = $166.50
There is potentially no deduction if the property inspection was merely incidental to the private purpose for the trip.
On his way to golf each Saturday, Michael drove past the property to 'keep an eye on things'. These motor vehicle expenses are not deductible as they are incidental to the private purpose of the journey.
If you fly to inspect your rental property, stay overnight, and return home on the following day, all of the airfare and accommodation expenses would generally be allowed as a deduction provided the sole purpose of your trip was to inspect your rental property.
A common mistake is to claim a deduction for the cost of travel when the main purpose of the trip is to have a holiday and the inspection of the property is incidental to that.
Where travel related to your rental property is combined with a holiday or other private activities, you may need to apportion the expenses. You may be able to claim local expenses that are directly related to the property inspection and a proportion of accommodation expenses.
Paul and Kylie spent $700 on airfares and $1000 on accommodation when they travelled from their home to a resort town, mainly for the purpose of holidaying, but also to inspect the property which they own
there. They also spent $70 on taxi fares for the return trip from the hotel to the rental property. They spent one day on matters relating to the rental property and nine days swimming and sightseeing.
No deduction can be claimed for any part of the $700 airfares. They can claim a deduction for the $70 taxi fare. A deduction for 10 per cent of the accommodation expenses (10 per cent of $1000 = $100)
would be considered reasonable in the circumstances.
The total travel expenses they can claim therefore amount to $170 ($70 taxi fare plus $100 accommodation). Accordingly, Paul and Kylie can each claim a tax deduction of only $85.