Changes to rental property deductions

The 2017 federal budget introduced a number of changes to rental property deductions. The proposed changes are to prevent taxpayers from exploiting certain deductions and also to decrease the impact of negative gearing.

From 1 July 2017 deductions for travel expenses for inspecting and maintaining a residential property will not be allowed. This includes all types of travel whether it be via car to collect rent or travel interstate to the property for an inspection. This proposed change will only affect travel by the owner. Costs undertaken by a property manager to inspect the property is still deductible.

Also as of 1 July 2017 there will be a limit to plant and equipment depreciation deductions incurred by investors in residential real estate. Investors who purchase plant and equipment after 9 May 2017 will be able to claim depreciation over the useful life of the asset (as per normal). However, after 9 May 2017 you must have purchased the asset yourself to be able to claim depreciation on the asset. This means if you received the asset on purchase of the property and the previous owner paid for the asset, you can no longer claim depreciation on those assets. This proposed change only applies to ‘plant & equipment’ items, this usually means the asset can be easily moved and is not fixed to the property e.g. dishwasher & ceiling fans.

The proposed two changes will only apply to residential properties. Travel to non residential investment properties (business facilities, factories) is still claimable as before.

Author: Rhys Frewin
Email: rhys@faj.com.au