Compliance technology specialist firm Super Central has warned SMSF trustees against claiming a tax deduction for expenditure incurred in the process of travelling to inspect a residential property held by the fund.
“From 2018, the government denied all travel deductions relating to inspecting, maintaining or collecting rent for a residential investment property,” Super Central stated.
The firm reiterated it is more important than ever for trustees to understand what they can and cannot claim at this time of year given the increasing popularity of property purchases made using a limited recourse borrowing arrangement. For example, it indicated an SMSF cannot claim a tax deduction for an airfare to the Gold Coast for a holiday because their fund has an investment unit there.
On a more positive note, Super Central confirmed SMSF trustees can claim expenses incurred to engage a third party, such as a real estate agent, to provide necessary property management services for interstate properties owned by their fund.
The government introduced this limitation on expense claims in the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 in order to combat what it labelled the “widespread abuse around excessive travel expense claims relating to residential investment properties”.
“As a result of these changes, travel costs for individual investors inspecting and maintaining residential investment properties will no longer be deductible,” the government said at the time.
“This will stop residential property investors from using the tax system to pay for their holidays by claiming costs as a rental expense.”
If the losses or outgoings are necessarily incurred in carrying on a business for the purposes of gaining or producing assessable income, an SMSF may still be able to deduct travel expenses in some circumstances.
Super Central acknowledged the reminder was technically not anything new, but it suggested it may still be news “to some planning to buy investment property interstate”.
