Govt curbs property tax deductions
THE federal parliament has passed legislation to limit tax and depreciation deductions claimed by residential property investors along with a vacancy tax for foreign owners who leave homes unoccupied.
Treasurer Scott Morrison and Assistant Minister Michael Sukkar said the reforms will help address housing affordability and assist private renters.
The Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 will disallow certain deductions relating to residential investment properties.
Morrison said the changes disallow claims for travel expense deductions and limit plant and equipment depreciation deductions to assets not previously used.
Depreciation will only apply where the depreciating asset was acquired new – this reform is expected to raise $260 million over forward estimates.
The Treasurer said limiting plant and equipment depreciation deductions will remove the existing opportunities for items to be depreciated by multiple owners in excess of their actual value.
For second hand residential properties purchased after May 9, investor will only be able to claim depreciation for plant and equipment assets where the depreciating asset was acquired new for that purpose. Continue reading
Tax Q&A: Your Questions on Depreciation Returns, Answered
Q: I am looking at buying my first investment property this year, and a friend has advised me to purchase a unit instead of a house for better depreciation benefits. I don’t quite understand how this works: houses are bigger, therefore shouldn’t the depreciation returns be higher? I would love some advice before I invest, as I’m aiming to keep my cash flow position as strong as possible (ideally I want a neutral or positively geared investment).
Thanks, Dale
A: Residential investment properties are usually classified into four main types of building: residential houses, townhouses, apartments or units (low-rise and/or high-rise). All these do allow you to obtain different types of capital allowance deductions.
If you are claiming under Division 40 on the above brand-new properties, you are generally entitled to claim the following percentages of the construction costs as a capital allowance:
a. Residential houses: 5–10%
b. Townhouses: 5–15%
c. Units/apartments, low-rise: 5–15%
d. Units/apartments, high-rise: 10–20% Continue reading
