Current as of September 2017
As mentioned in the May budget travel deductions can no longer be claimed against rental property rent from 1 July 2017. Deductions for travel to your residential rental property will no longer be available. Therefore costs such as travel costs of attending inspections, maintaining the property or collecting rent, travel to meetings with property agent or strata meetings will be excluded from your claim.
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 be applicable to entities that are “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 form of apportionment will need to 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. What the property investor can claim now is the depreciation on plant and equipment costs that you have actually paid for separately yourself. Prior to the change an investor acquiring a residential rental property could obtain a quantity surveyors report in order 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 give rise to deductions for depreciation until either the property is sold or the asset has been fully depreciated.
In relation to owner-builders and “substantial renovations” – if the investor is to live in the new residential premise or substantially renovated premises, then 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.
This newsletter has been produced by Stanley & Williamson as a service to its clients and associates. The information contained in the newsletter is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this newsletter, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under Professional Standards legislation.