The tax office have just updated their guide on claiming travel expenses for investment properties, and we thought that this might be a timely reminder for everyone about the five main traps that we’ve had to warn clients about in the past.

Trap #1: Incidental travel. Driving past your investment properties whilst on your way to another destination doesn’t qualify as a deduction, unfortunately. The purpose of the trip needs to be about the investment, otherwise it is deemed to be private and no deduction allowed.

Trap #2: Hunting for property. If you are investing in your own name, then driving around to look for potential investments won’t count as a deduction, either. If you’ve not yet made the purchase, then the expense does not relate to existing income.

Trap #3:Flying interstate or overseas. Many of our clients own property interstate. It’s a great way to get exposure to multiple markets, and it often helps to keep land tax lower. Getting a tax deduction for a holiday to inspect your property sounds great, too, but if the main purpose of the trip is personal then the tax office will deny the entire cost of flights. You can also only claim accommodation for the portion of the trip directly related to your investments and a travel diary must be kept if you are away for six or more nights.

Trap #4: Too many kms. The ‘cents-per-km’ method that most of you use for travel deductions, allows for a maximum of 5,000km per car, per person. That’s the total; across all work related, business and investment travel. The only exception, incidentally, is additional travel for your accounting related expenses. So if your work or business travel already hits the 5,000km threshold, then you cannot claim additional kms for your investment properties.

Trap #5: Partners without ownership. If the investment property is solely in your own name, then your partner cannot claim travel expenses on your behalf (unless they receive an income from you for their efforts). Likewise, you cannot claim for your partner’s travel expenses against your own income, either. This is also important in relation to Trap #4, above.

Of course, there are still plenty of opportunities to make the most of your travel deductions and using a little creativity can often help get you past many of these traps. You know where to find us if you’d like to chat about that soon.