Clients with negative gearing arrangements in place are set to lose out on a popular deduction following last night’s federal budget.
Popular tax deductions scrapped for property investors
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 Accountants Daily.
“A lot of investors have properties a long distance away from their home, and incur travel expenses when they visit their residential investment,” he said.
“There will be an outright ban on travel expenses – that’s an absolute loss,” he said.
Further, for properties bought after 9 May 2017, the government will also limit plant and equipment depreciation deductions to only those expenses directly incurred by investors.
While these measures won’t be happily met by property investors, 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,” Mr Greco 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 [in] Australian’s claim? If so, let’s get this on the table and start talking about it," he said.