However, Michael Hallinan, special counsel for SUPERCentral, said that expenses incurred by an investor to engage third parties such as real estate agents to provide any necessary property management services is deductible.
“While this is ‘old’ news, it’s still news to some planning to buy investment property interstate,” Hallinan said.
“Purchasing property within a self-managed superannuation fund under a limited recourse borrowing arrangement is becoming increasingly prevalent. However, determining what an SMSF can and cannot claim for, especially when it comes to travel expenses incurred by a member of the fund is important due to the recent changes surrounding this area of law.”
Hallinan continued that from 2018, the government denied all travel deductions relating to inspecting, maintaining, or collecting rent for a residential investment property.
“As a result of these changes, travel expenditure incurred by individual investors inspecting and maintaining residential investment properties is no longer deductible,” he said.
“However, expenses incurred by an investor to engage third parties, such as real estate agents, to provide any necessary property management services, will remain deductible.”
He continued that the reasoning for the disallowance of the deduction of travel expenses for residential rental properties was examined in the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017.
“The position taken was that by disallowing travel expenditure incurred by individual investors it would combat the ‘widespread abuse around excessive travel expense claims relating to residential investment properties’ in order to ‘improve the integrity of the tax by addressing the systematic risk of excessive and incorrect claims for travel expenses associated with residential investment properties’,” he said.
“An SMSF may continue to deduct travel expenditure if the losses or outgoings are necessarily incurred in carrying on a business for the purposes of gaining or producing assessable income.”
He added it is important to note that travel expenses can still be claimed by other investment vehicles, such as a corporate tax entity, a superannuation plan that is not a self-managed superannuation fund, a public unit trust, a managed investment trust; or a unit trust or a partnership, all of the members of which are entities of a type listed above.
“Most importantly, when considering if it is appropriate for the fund to pay a particular expense, it is important to ensure the payment is in accordance with a properly formulated investment strategy, allowed under your trust deed and the super laws,” he said.
