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Monday, 20 August 2018
Page: 7658

Treasury Laws Amendment (Housing Tax Integrity) Bill 2017

Dear Mrs Wicks

Thank you for your correspondence of 6 February 2018 concerning petition number EN0447 regarding disallowing deductions for travel expenses for residential rental property. I sincerely apologise for the delay in responding to you.

As you are aware, the Government announced in the 2017-18 Budget that it would improve the integrity of the tax system by disallowing travel expense deductions for individual investors with residential investment properties.

From 1 July 2017, travel deductions for individual investors with residential investment properties, including travel costs associated with inspecting and maintaining properties, are no longer deductible. Legislation giving effect to this measure received bipartisan support through parliament and was granted Royal Assent on 30 November 2017.

This integrity measure addresses the excessive claiming of travel deductions by taxpayers. Significant abuse of the tax system had been witnessed around excessive travel expense claims that do not represent a legitimate commercial purpose.

The Australian Taxation Office (ATO) identified extensive concerns around abuse of deductions through incorrect claiming or incorrect apportionment of private expenses, particularly where the travel undertaken is for a mixed purpose (for example, inspecting a rental property and taking a family holiday).

This integrity measure does not imply that all previous travel claims for rental properties were excessive, but provides a pragmatic way to address the systemic risk of excessive and incorrect travel deduction claims.

This change does not prevent investors from engaging third parties such as real estate agents to provide property management services for investment properties. These expenses remain deductible. This is because the risk of excessive and incorrect travel deduction claims is reduced where the travel is undertaken by a third party as part of their business activity.

I trust this information will be of assistance to the Committee.

Yours sincerely

from the Treasurer, Mr Morrison