Travel to view deductible?

[richard56]

Hi
If your LTC is already in the business of renting residential property would travelling ...lets say flying from Auckland to Christchurch...to view a property be a deductible expense?
Especially if you actually purchase the property?
Thanks
Richard

[Gladdynook]

I'd say no, as it seems the only costs prior to owning a property that CAN be deducted is the legal fees and valuation for arranging the mortgage.

However traveling to your rental property once you own it, to carry out an inspection would be. On this note, does anyone know if there is still a maximum travel figure you can claim? i seem to remember it is $2K per annum regardless of how many properties you own.

[Rosco]

Hi Richard,

This cost has nothing to do with rental activity. It is a cost of buyng the property, and unfortunately if you are a long term hold investor, then no deduction is allowed. If you were a trader, then it would be claimable.

Maximum travel figure - There is a maximum amount of km's you can claim if claiming vehicle expenses based on mileage. But there is no maximum on flights or other travel costs. The test for flights, is what is the main purpose? If the main purpose of the flight is a private holiday, where you drive past your rentals because you happen to be there, then it won't be claimable. But if the main purpose is to inspect your rental houses, and then drop in a some friends, the expenses would be claimable.

Ross

[Wayne]

what is the maximum number of km's you can claim?

[Rosco]

Public Service Mileage rate is intended for use by self-employed taxpayers whose total business related travel is less than 5,000 km per year. The Public Service Mileage rate was established based on average mileage of 14,000km per year. If your vehicle does a lot higher mileage, then the Public Service Mileage rate may not be appropriate.

So if you are doing more then 5,000, you have to ensure that the method you are using, accurately reflects the true cost. There is a risk in using the Public Mileage Rate for more mileage, as it wasn't intended to reflect the true cost for higher mileage.

In 2006 (I think) IRD published that taxpayers could use other rates, as long as they reasonably reflected the true cost. AA produce rates for different total mileage used. I think it is much better to use AA rates, as they better reflect the True cost. As long as you use the appropriate rate from AA for the mileage of your vehicle per year, then there shouldn't be a limit.

Ross