re; motor vehicle and tax related decisions

[hwd007]

re; motor vehicle and tax related decisions

My car engine failed on the way back from my investment property last Saturday. The car engine lost allot of oil and I think it ceased up. In terms of mileage this financial year, I have used my car mostly for property investment travel, as my property is in the country and thus the travel distance is significant. Repair costs could be substantial. Thus I have the following tax related questions;

1. I'm wondering if the repair expenses can be written off as a loss apportioned by usage ?

2. Also if I send the car to the wreckers, can I again write any of it off as a loss ?

This brings me to the other question of a replacement car and the most tax effective way to buy it. In terms of future usage, I'm still expecting my investment property travel to be the bulk of my travel.

3. Would it be more tax effective to buy or lease into the trust company name, rather than into my own name ?

4. Lease or Buy ?

Your thoughts appreciated. I will need to make a decision about the car fairly soon.

Thanks

 

[Propertunity]

You can claim travel to an IP there and back about once or at most two times per year.

You cannot claim travel to go look at property on buying trips as a private investor.

There are a few ways to claim that an accountant will be able to advise you on:
cents per km basis, and some others.

Your ceased engine is a private expense.

You need specific advice about structures: companies, trusts etc as it will be specific to your own circumstances.

 

[redsquash]

You can claim travel to an IP there and back about once or at most two times per year.

You cannot claim travel to go look at property on buying trips as a private investor.

There are a few ways to claim that an accountant will be able to advise you on:
cents per km basis, and some others.

Your ceased engine is a private expense.

You need specific advice about structures: companies, trusts etc as it will be specific to your own circumstances.

I like to look at my property monthly. Why would the tax office knock me back on travel expenses as I only want to make sure my half mllion dollar investment is safe. seems prudent to me.
Do you have a refences for your claim as I couldnt locate one on the ATO web site

 

[Propertunity]

I like to look at my property monthly.

You can look at it as often as you like - daily if you want. But they won't all be tax deductible.

Why would the tax office knock me back on travel expenses as I only want to make sure my half mllion dollar investment is safe.

Do you hire a PM? If so, you are already claiming that expense and a PMs job is to inspect 6 - 12 monthly etc. You cannot double dip. You get to check up on your PM once or at most twice a year.

seems prudent to me.

No, it is obsessive and if the tenants see you doing it - it might be construed as stalking

Do you have a refences for your claim as I couldnt locate one on the ATO web site

It falls into the category of "reasonable" so there is no set number of trips. You will get 1, you may get 2, you will not get 12 in a year.

I'm not an accountant - they might have a reference. I tend to get obsessive about new buys rather than looking at old ones already put to bed

 

[marg4000]

How many IPs do you have? Monthly visits to more than a couple would be a bit task.

To claim travelling expenses to an IP, there must be a purpose to the trip, which must be recorded along with the other details. To drive there and back just "have a look" would not entitle you to a deduction.

The allowance per kilometer as allowed by the ATO is inclusive of all running expenses, rego, insurance etc., thus any repairs are not allowable.

As Propertunity said, if you have a PM then once or twice a year would probably be allowable.

We had an IP we self managed. Our accountant recommended we claim no more than 4 trips a year. Properties with a PM we claim one trip per year to inspect.
Marg

 

[hwd007]

Yes I see your points. The interesting part as raised is, where is it written by the ATO that says 2 trips per year are the limit. Based on what I'm reading, I'm getting the impression it's not a written ATO rule, but more guidance by accountants. I guess much comes down to the purpose of the trip. i.e. typically the trip to an IP is just for property inspection purposes. Thus more than 2 trips per year might seem unnecessary. Also part of rental / lease agreements typically seem to indicate inspection every 6 months, being twice a year. Thus perhaps this might be part of the basis for the two trips per year claim. However if an alternate agreement is in place for inspections, perhaps a case can be made on that basis also. Alternatively if for example you decide you wish to carry out a repair yourself and you have already had 2 inspections for the year, but require a thrid trip to do the repair and possibly more trips for other repairs, all a legitimate part of operating the IP.

If for example one commences to build a rural rental dwelling, it might likely involve more than 2 trips in a year and unless the property is managed professionally, there might likely be further trips as the maintenance requirement might likely be higher, due to it being a rural property. This means many trips per year could likely be required to maintain and develop the property. There seems to be considerably more work in involved in maintaining a rural property.

 

[marg4000]

There is no written limit because situations vary widely.

The main point of accountant's advice is to fly under the ATO radar. Excessive expenses will raise a red flag and you can expect a visit from the ATO auditors.

My brother was regularly flagged for audits of motor vehicle expenses as he worked on the relieving staff of QML and drove all over an area of approx 500k. He was audited every 2-3 years and passed with flying colours as he had all the necessary evidence.

You can claim whatever you like, but should be prepared to back it up with hard figures and sounds reasons. Who knows, you may get away with it. You may also be hit with huge penalties and fines.

Is it worth it?
Marg

 

[hwd007]

Thanks for that advice. I think the question has largely been answered, i.e. there appears to be no fixed limit of visits claimable for travel costs for property investments. I might add, that nobody has suggested any laws should be disregarded, so yes whatever you claim, you need to be able to legitimize such claims with hard evidence and probably with the guidance of ones accountant, who hopefully has a good understanding of tax law. Presumably such determinations might be made along the lines of the claim being directly related to the management of the property and that such travel is central to the earning of income from that property investment. As said though ones accountant should advise on that and if in doubt further consult the ATO prior to making such claims.