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Residential Property Investors lose depreciation and travel deductions

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Federal Budget 2017 - Residential Property Investors lose depreciation and travel deductions

Anthony J Cordato
 
Australia May 12 2017
 

From 1 July 2017, Australian Property Investors will lose two long-standing tax deductions for residential properties as a result of the Federal Budget 2017.

The following extracts state the current law (from the ATO Guide) and the new law (copied from the Budget papers). The precise terms of the new law will not be known until the new measures are legislated.

1. Depreciation of fittings and fixtures

Current Law: Deduction for decline in value of depreciating assets (i.e. depreciation)

When you purchase a rental property, you are treated for tax purposes as having bought a building, plus various separate items of ‘plant’. Items of plant are depreciating assets, such as air conditioners, stoves and other items.

You can deduct an amount equal to the decline in value for an income year of a depreciating asset that you held for any time during the year. However, your deduction is reduced to the extent your use of the asset is for other than a taxable purpose. If you own a rental property, the taxable purpose will generally be for the purpose of producing rental income.

Source: ATO Guide for Rental Property Owners 2016 (page 18)

New Law: limit plant and equipment depreciation deductions to outlays actually incurred by investors

From 1 July 2017, the Government will limit plant and equipment depreciation deductions to outlays actually incurred by investors in residential real estate properties. Plant and equipment items are usually mechanical fixtures or those which can be ‘easily’ removed from a property such as dishwashers and ceiling fans.

This is an integrity measure to address concerns that some plant and equipment items are being depreciated by successive investors in excess of their actual value. Acquisitions of existing plant and equipment items will be reflected in the cost base for capital gains tax purposes for subsequent investors.

These changes will apply on a prospective basis, with existing investments grandfathered. Plant and equipment forming part of residential investment properties as of 9 May 2017 (including contracts already entered into at 7:30PM (AEST) on 9 May 2017) will continue to give rise to deductions for depreciation until either the investor no longer owns the asset, or the asset reaches the end of its effective life.

Investors who purchase plant and equipment for their residential investment property after 9 May 2017 will be able to claim a deduction over the effective life of the asset. However, subsequent owners of a property will be unable to claim deductions for plant and equipment purchased by a previous owner of that property.

This measure is estimated to have a gain to revenue of $260.0 million over the forward estimates period.

 Revenue ($m)

 

2016‑17

2017‑18

2018‑19

2019‑20

2020‑21

Australian Taxation Office

40.0

100.0

120.0

Source:   2017-18 Budget Paper No. 2 - Revenue Measures (page 30)

Government turns GST on its head for new property sales

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Government turns GST on its head for new property sales

Steve Healy Jon Denovan Cameron Steele
 
Australia May 12 2017

The Budget measures include a radical plan to shift the responsibility of accounting for GST from property developers to purchasers. Under the proposal, purchasers must remit the GST directly to the Australian Taxation Office (ATO) as part of the settlement process.

The proposal will apply to newly constructed residential properties and new subdivisions from 1 July 2018.

What does this mean for the developers?

The full impact fordevelopers will depend on the final form of the legislation. The critical question is whether the purchaser’s liability will be interim or final.

If the purchaser’s liability to account for GST is non-final, the purchaser may be required to collect a notional amount and a true-up may then occur when the property developer submits its business activity statement (BAS). This may present cash-flow and funding issues for developers, particularly if the GST amount remitted by the purchaser is significantly more than the developer’s actual GST liability.

Rental affordability snapshot 2017

Download the report here

Rental Affordability Snapshot 2017

27 Apr 2017 by Anglicare Australia www.anglicare.asn.au

Anglicare Australia's 8th Rental Affordability Snapshot shows a dire shortage of affordable rental houses for people on low income. It shows that at a national level, only 6% of the 67,651 dwellings surveyed on the first weekend in April were suitable for any of the 10 selected households in receipt of government benefits. This is down from 7% in 2016.

QCAT one day training event

Special event

More information and or register here

QCAT - BASICS TO BRILLIANCE

ONE day special event

Cricketers Club - The Gabba 411 Vulture Street, Woolloongabba
19th May 2017 9am to 4pm
Morning tea and working lunch included
Free parking at the venue

Stacey Holt from Real Estate Excellence will present the day focusing on what every property manager should know about QCAT (the basics) and working the way through to Brilliance.

The session will include the following;

  • What is an urgent and non urgent application?
  • QCAT Form 2 urgent and non urgent application completions for two of the common scenarios in this industry; rent arrears termination and dispute about bond (vacate).
  • The most common sections of the Act that should be cited in the application to QCAT
  • Steps that should be taken if a tenant makes an application
  • Time frames and the law for QCAT application
  • Preparing for QCAT including tips on how to prepare a winning application
  • Understanding QCAT published decisions and appeals
  • Case studies of QCAT decisions and appeals and how to use the precedents

 Please email This email address is being protected from spambots. You need JavaScript enabled to view it. if you have any questions.

Morning tea and working lunch is included - please advise in writing of any dietary requirements prior to the event.

If you wish to register manually and save the online booking fee, email This email address is being protected from spambots. You need JavaScript enabled to view it. the name and email of attendees.

Payment methods are direct deposit, cheque or credit card using paypal online or pay by credit card online via invoice provided by  Real Estate Excellence. You do not have to use paypal. If you wish to pay via credit card, paypal can be used OR you can request an online payment via invoice. If you prefer to pay by direct deposit, credit card (not using Paypal)  or cheque, simply click on other payment options when completing the online registration form.

Thank a Property Manager Day 2017

November 24 2017

Thank a Property Manager day is an initiative commenced by Real Estate  Excellence in 2012.

Thank a Property Manager day is celebrated on the last Friday in November each year. This year is November 24th 2017.

The day is about stopping to thank the hard working and dedicated property managers who sometimes don't receive the thanks and praise that is often deserved. A day to stop and say thanks and to also reflect on the great work that is done in a profession that is almost a necessity in today's society.

Ensure that the date is in your calendar; plan a breakfast or a morning tea, lunch or even drinks after work.

If you would like to be on our mailing list please email This email address is being protected from spambots. You need JavaScript enabled to view it.