Australian Budget 2017- Negative Gearing and Deductions

The Federal Budget was handed down on Tuesday night and there are some changes that property investors need to know about.  Negative gearing still remains but rules surrounding this have been tightened especially around travel expenses and depreciation deductions. Australia has approximately 2 million landlords and of the 2 million approximately 1.3 million are negatively geared, so many property owners will be affected.

Under these new rules, that will come into action from July 1, 2017, depreciation deductions for equipment items such as Washing Machines and ceiling fans will only be allowed under these rules if the investor actually brought them. This integrity measure is intended to address the concerns that investors are claiming tax write offs in excess of the actual value of the item, with multiple owners claiming the same depreciation deductions.  This change in the budget is set to gain approximately $260 million over the next 4 years.

Under the new budget investors will also not be able to claim tax deductions for travel “relating to inspections, maintaining or collecting rent” for a residential rental property from July 1. The concern for this measure being implemented are that investors are claiming travel charges related to “inspections” but in actual fact they are using these for holidays, costing the government over $160 Million per year. Property Management fees will still be tax deductible for third parties such as real estate agents. The new budget expects these changes to bring in an extra $540 million in revenue over the next four years.

You can read about the 2017-2018 Budget here

Written: 11 May 2017, Updated: 15 January 2020

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