Matthew Stewart, Edney Ryan Accounting TeamAs we reach the end of another financial year, there are a number of legislative changes worth recalling which took effect from 1 July 2017. Here we highlight the changes to residential investment property deductions, which will be relevant for many of our clients.

Changes to Residential Rental Property Travel Expenses

Under legislation that took effect 1 July 2017, travel expenses for investors inspecting and maintaining a residential investment property are no longer tax deductable. The Budget papers describe these as an integrity measure to address concerns that many taxpayers have been claiming travel deductions without correctly apportioning costs, or have claimed travel costs that were for private travel purposes. Travel expense deductions will still be permitted for non-residential investment property.

Depreciation Deductions for Plant and Equipment Used in Rental Properties

From 1 July 2017, residential property investors can no longer receive a deduction for the decline in value of previously used plant and equipment in rental properties. In a nutshell, property investors can now only claim depreciation on plant and equipment items that were purchased new.

The Budget papers state that these plant and equipment items are usually mechanical fixtures or those which can be ‘easily’ removed from a property such as dishwashers and ceiling fans. Investors who purchase plant and equipment for their residential investment property will be able to claim a deduction over the effective life of the asset. However, subsequent owners of a property will be unable to claim deductions for plant and equipment purchased by a previous owner of that property.

The net result of this measure is that only the person who actually pays for the asset will be able to claim a depreciation deduction for it.

Exceptions

Properties owned by the following entities are excluded from the above investment property changes and are still able to claim travel expenses and depreciation deductions as previously:

  • Corporate tax entities
  • Superannuation plans other than self-managed superannuation funds
  • Public unit trusts
  • Managed investment trusts
  • Unit trusts or partnerships whose members are the above listed entities.

If you have any concerns about how these changes will affect your tax returns for the 2017-2018 financial year, please call us on (02) 9908 9888 to discuss.