"Honey, lets go visit the rental property....quickly"
Are you a rental property investor who previously claimed expenses for your rental property? Well there are changes afoot following recent 2017/18 budget announcements.
Deductions for travel-
Deductions for travelling to a residential rental property will no longer be allowable for investors after 1 July 2017. This change relates to individuals travelling to collect rent, maintain the property or complete an inspection, leaving investors only a short period before 30 June to claim a final deduction. An example of the types of deductions previously able to be claimed are: plane fares, hotel fees, motor vehicle expenses.
Investors will still be able to engage third parties such as real estate agents for property management services. This expense will remain deductible.
Deductions for depreciation of plant and equipment-
The recent Federal Budget has removed the ability to claim a tax deduction for depreciation on the fixtures purchased with a residential rental property. The new restriction applies for properties settled after 9 May 2017. Plant and equipment depreciation deductions will be limited from 1 July 2017 to amounts actually outlaid by a rental property investor. This limitation relates only to residential property investors.
In the past, an investor acquiring a residential rental property could obtain a quantity surveyor's report in order to claim depreciation on fixtures acquired with the property. After the Budget announcement of 9 May 2017, this will not be allowed as a tax deduction. This is due to concerns from the government that plant and equipment items are being depreciated by successive investors in excess of their actual value.
If you purchased the property before this date, you have one last opportunity to obtain a quantity surveyor's report to accelerate your allowable deductions. Obtaining a quantity surveyor's report will still allow you to claim a deduction for the cost of construction of the property. There is no change to this deduction, which allows the construction costs to be written off over the first 40 years of the property.
At this stage information on the changes is limited to the budget announcements and further detail will be provided once the legislation has been passed. If you would like further information in relation to what you can and cannot claim relating to your rental property, please do not hesitate to contact Walsh Accounting.