From 1 July 2017, the government plans to “improve the integrity of negative gearing” by disallowing deductions for travel expenses.
“This is one change that is not going to please a lot of people,” the Institute of Public Accountants’ (IPA) Tony Greco told SMSF Adviser.
“A lot of investors have properties a long distance away from their home and incur travel expenses when they visit their residential investment,” Mr Greco said.
“There will be an outright ban on travel expenses, that’s an absolute loss.”
In the case of SMSFs, for example, the fund would claim a deduction for a trustee carrying out activities such as travelling to inspect or maintain the property, or collect rent. This would not be allowable if the measure is passed.
“It’s another step towards making sure that everything is done on a commercial basis,” the head of BT’s technical advice team, Bryan Ashenden, told SMSF Adviser.
For properties purchased after May 9 2017, the government will also limit plant and equipment depreciation deductions to only expenses directly incurred by investors.
While property investors will not be happy with these changes, Mr Greco said that “in the grand scheme of things”, any changes involving negative gearing could have been significantly more dramatic, given the government’s housing affordability agenda.
“So, probably, a lot of investors are also relieved that the changes haven’t gone further,” he said.
Michael Croker, head of tax at Chartered Accountants Australia and New Zealand, suggested that if this is a step towards a broader slowdown of the deductions on the table for Australian taxpayers, debate needs to begin now.
“Disallowing deductions for rental property travel expenses and depreciating assets not personally purchased by the investor will be seen as the thin edge of the wedge by some CAs. We know the ATO is also worried about increasing deductions for work-related expenses. Are other deduction claims in the government’s sights as part of a slow burn approach to reducing deductions Australians claim? If so, let’s get this on the table and start talking about it,” he said.
Typical of both sides of government to tinker at the edges and just kicj the can down the road. No structural reform for business or savings in this country and no vision for where Australia needs to be despite mounting concerns on an economic front. No leadership from either tweedle dee or tweedle dumb. And these are the fools telling us as IFA’s how to run our business….wow. There are not any drugs out there that will make me believe that these fools in Cantberra know what they are doing.
The accountant that our clients use has steadfastly denied any claims for trustees travelling to view their properties. We just deferred to their supposed greater knowledge of the tax rules, have we been wrong to do so?
Unfortunately too many people mixing travel to investment properties in holiday destinations with personal use and claiming full cost of trip against personal income.
Re the changes to “plant and equipment depreciation deductions limited to only expenses directly incurred by investors” are we going to see a new wave of property contracts where the purchaser buys the house for one price plus separately buys all the plant and equipment listed individually (both of which total up what the seller wants for the house) Seems to me the logical way to get around this as the investor has paid for the plant and equipment and can still depreciate it (and will lower stamp duty as well). That’s what i would do on my next purchase
As a business person, I can fly to see a client and claim the deduction. But if i fly to a property i own out of town and only do property related activity i can not claim it. Where is the sense in that?? If they are worried about dodgy claims then audit the claim – don’t take away all the valid claims. FYI I own properties inside and outside my SMSF and I have to travel to all of them