Issue
Is the taxpayer entitled to a deduction for car expenses incurred in maintaining an investment property using the cents per kilometre method under section 28-12 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. The taxpayer is entitled to a deduction for car expenses incurred in maintaining an investment property using the cents per kilometre method under section 28-12 of the ITAA 1997.
Facts
The taxpayer owns investment properties.
The taxpayer owns the car they use to travel to the investment properties.
They have a managing agent to collect rent and lease the properties. The managing agent is instructed to contact the taxpayer if a problem arises with the maintenance of the property. The taxpayer then inspects the property to determine whether they can fix the problem before consulting a professional.
A reasonable estimate of the taxpayer's travel to inspect and maintain the investment properties is less than 5000 km in the income year.
Reasons for Decision
Section 28-12 of the ITAA 1997 allows a deduction for car expenses using one of the four methods under Division 28 of the ITAA 1997. The subdivisions then prescribe how to calculate the deduction referrable to each method.
Subdivision 28-C of the ITAA 1997 sets out how to calculate a car expense claim using the cents per kilometre method. It is based on the number of business kilometres travelled in the income year.
'Business kilometres' is defined in subsection 28-25(3) of the ITAA 1997 as the kilometres the car travelled in producing the taxpayer's assessable income. The business kilometres travelled can be calculated by making a reasonable estimate.
Under subsection 28-25(2) of the ITAA 1997 this method can only be used if the taxpayer travels five thousand business kilometres or less or restricts the claim to five thousand business kilometres or less in the income year.
The taxpayer's travel to maintain and inspect the investment properties they own has been incurred in connection with gaining income from these investment properties and is therefore considered to be business kilometres travelled.
The taxpayer's reasonable estimate of business kilometres travelled is less than five thousand in the income year.
Therefore, the taxpayer would be entitled to a deduction for the travel to maintain and inspect the investment properties using the cents per kilometre method under section 28-12 of the ITAA 1997.