Pre-purchase expenses, accommodation and deductibility

[Diamondo]

Just need some help with some questions on property-related expenses and deductibility.

Before buying two IPs in Ballarat recently, I made many trips there (250kms per return trip) from Melbourne solely for the purpose of checking properties and negotiating purchases. That is, these expenses were incurred before settlement - I'm aware that once purchased, travel expenses (specifically mileage) to and from an investment property are deductible.

Could a claim be made for mileage if incurred in a pre-settlement period?
Perhaps the portion of the mileage associated with the two IPs subsequently purchased?
(methinks, NO but hey, I'm open to good news).

What are people's experiences with claiming accomodation expenses (eg motel) linked to investment property? If I have to stay overnight away from my home to repair maintain IPs or meet with a managing agent:
a. are these accommodation expenses still deductible? Any particular limit?
b. is this likely attract more than the usual 'justification' (ie receipts).
That is, requests for additional information or other attention from the ATO?

I tried doing a search on this part of the forum in relation to the above questions, but couldn't find anything specific...maybe this has all been covered elsewhere.

Thanks everyone.

 

[damacc]

Any pre-inspection travel costs including mileage are not deductible.

As for travel after you have purchased the investment property it comes down to the purpose of the trip.

I give an example to clients that if they have a property on the Gold Coast and go for a week's holiday then the cost for the holiday isn't tax deductible. If they go and see the investment property whilst they are here then should be able to claim part of the cost as tax deductible.

If they go to the Gold Coast for a weekend to see the investment property, meet the managing agent then the cost would be tax deductible.

So, if your purpose is to go to Ballarat to do repairs on your property and meet your managing agent then the cost would be deductible. There is no actual "limit" on the amount that can be spent. I always figure if you are reasonable with these things then you will be ok. Your need to keep all your receipts for accommodation, meals, incidentals, etc.

As for the mileage if you are going to use the cents per km method then just write this in your diary. You don't necessary need to keep a log book. I mention to clients keep a financial year diary and write everything in this.

 

[Diamondo]

Thanks for all of that. I kind of expected that pre-purchase expenses are limited to the usual range of establishment costs...as for post-purchase mileage and accommodation, I was unsure as to whether the ATO was prone to be skeptical.

Am considering sub-dividing the property and travel to sort thru this with the Council and others is required - I guess this 'development' purpose would fall outside their travel expenses parameters...?

 

[rstephenp]

Is travel cost to do Pre-settlement inspection tax deductible?

Steve

 

[damacc]

Hi Diamondo,

Accounting for properties is done in two ways - either as an investor as or a business. If you are thinking of developing the land then you would be in business. The above information was stated for a property investor, not for a property developer.

If you are developing it then the costs that you can claim are different. Therefore if you need to travel to see the council and stay overnight that probably would be deductible. Having said that you need to have all the other stuff that goes with being a developer - like an ABN.


rstephenp - if this is for an investment property then the travel costs are not deductible to do a pre-settlement inspection.