Rental property deductions you can’t claim anymore!

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For accurate information regarding the following changes and other tax-related matters, it is advisable to consult professional accountants in Sydney. The May budget announced that starting from 1 July 2017, individuals can no longer claim travel deductions against rental property rent. This means that expenses like travel costs for attending inspections, maintaining the property or collecting rent, and travel to meetings with property agents or strata meetings, will no longer be eligible for deduction.

The definition of travel cost includes motor vehicle expenses, taxi or hire car costs, airfares, public transport costs and any related meals or accommodation. 

The travel deduction exclusion rule will not apply to entities “carrying on a business”, and travel costs relating to property investing, providing retirement living, aged care, student accommodation, or property management services will still be claimable. 

The change here will not prevent an investor from claiming a deduction where a property has a dual purpose. Examples of a dual purpose include where the property has another source of income and where the property is both a commercial and a residential premise. Of course, some apportionment must be undertaken to determine the deductible and non-deductible travel costs. 

There is also a limitation on plant and equipment depreciation deductions for residential properties from 1 July 2017. The property investor can now claim the depreciation on plant and equipment costs you paid separately. Before the change, an investor acquiring a residential rental property could obtain a quantity surveyor’s report to claim deductions for fixtures that would be deductible over their effective life.  

These changes will apply on a prospective basis, with existing property investments grandfathered. Plant and equipment forming part of residential investment properties as of 9 May 2017 will continue to yield depreciation deductions until either the property is sold or the asset has been fully depreciated. 

Concerning owner-builders and “substantial renovations”, if the investor is to live in the new residential or substantially renovated premises, no depreciation will be allowed. Only deductions for capital works will be allowed. 

If you would like to know more, please feel free to contact your client manager. 

Kreston Stanley Williamson Team

*Correct as of September 2017

Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.

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