The Federal Government has passed the Housing Integrity Bill which enacts the following Federal Budget recommendations:
1) Denies a tax deduction for travel to inspect a residential investment property;
2) Denies a tax deduction for depreciation of plant and equipment as part of a residential investment property unless the taxpayer is the original (first) purchaser of the property.
This means that no tax deductions can be claimed for depreciation on second hand rental properties from 1 July 2017 unless that property was already owned by the taxpayer on 9 May 2017.
These denied deductions apply to individuals and discretionary trust taxpayers. They do not apply to:
• Self-Managed Superannuation Funds
• Public Unit Trusts
• Managed Investment Trusts
• Partnerships or unit trusts involving the above entities.
The rules only apply to residential properties, so travel to inspect commercial properties and depreciation on second hand commercial properties can still be claimed as a deduction.
Further, second hand residential property owners can still claim a tax deduction for Division 43 Capital Works (non-plant and equipment related building depreciation). In addition, any assets they purchase new (e.g. a new air conditioner) can be depreciated.
For clarification on how these new rules will affect your rental property investment, please contact your usual Hanrick Curran advisor or alternatively, Jamie Towers on 07 3218 3900 or Jamie.firstname.lastname@example.org.
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.