In the May Budget, the government introduced some changes in an attempt to reduce the pressure on housing affordability. Here is what you need to know about how these changes will affect you?
For a long time now deducting travel expenses for traveling to a property you own for rental purposes was the norm, whether it be in your state or interstate.
As per the 2017/18 budget, the government intends to disallow all travel expenses relating to inspecting, maintaining, or collecting rent for a residential investment property from 1 July 2017.
So, what does that mean for every couple or individual who may own a residential property in their personal name(s)? From the 1 July 2017 you will not be able to claim expenditure from traveling by car, plane or any other way to your residential rental property as a tax deduction against rental income. Furthermore, as per current legislation, the expenditure cannot be added to the cost base of your rental property for capital gains purposes.
But don’t fret just yet, there is some good news, you will be able to deduct travel expenses if you are carrying on a business or one of the following entity types owns the property:
Travelling expenses are not the only rental deduction affected by this years budget, everyone’s favourite deduction, depreciation, has also taken a hit. Under the new rules proposed, investors will no longer be able to depreciate assets found in a rental property installed by any previous owners.
Just like the effects to travel expenses the depreciation changes do not affect deductions
that arise in the course of carrying on a business or for:
It is important for property investors to be aware of these new changes before they plan their next investment. A property has to be built after 1987 for an investor to claim any Capital Works benefits.
Furthermore, when considering purchasing your first or next investment property it is recommended to consider the type of property that would best suit your financial position at the time or how you would like to set yourself up in the future.
By Dimitrios Garas CPA, Accountant
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