With the uncertainty spotlight on the Australian federal government budget o reduce the ability of rental property owners to claim tax deductions for rental ownership expenses, we outline some of the changes the government is introducing to reduce this powerful tool for tax minimisation and wealth creation.
- The abolition of claiming a travel expense to carry out inspections or to collect rent from investment properties from 01 July 2017.
- Claiming interest on properties being built to be investment properties and not yet available or completed for renting. This has in the past be an allowable deduction but will soon be disallowed as announced in budget May 2018. This will take affect from 01 July 2018 and effectively disallowed from the 2019 tax return year.
- There has also been changes to claiming depreciation on old items. From 01 July 2018, you may only claim depreciation on items within the building that are new. Therefore, you can only claim depreciation if you buy a newly built property. You may however still be able to claim the building as per depreciation reports, but not the fittings inside the property. In the past you could purchase an existing property and get depreciation reports prepared which claimed the building and old fittings within the property. Now, only new fittings (not owned or depreciated by previous owners) within the property will be able to be depreciated.
- If you are a developer, you will have to pay GST on the sale of a property at conveyancing settlement from 01 July 2018 (at normal rates or margin scheme), unlike previously when it was remitted through your Business Activity Statement reporting. If you wish to apply the margin scheme to a property sale, you will need to stipulate this through the property contract and the conveyancing process.
As you can see, there are many changes already in effect that reduce the opportunity to claim deductions and depreciate items in this area. If you are planning to buy a rental property, we recommend speaking to an accountant who is fully educated and experienced in this field, well ahead of the purchase to ensure you are across these changes and how this may impact you.
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