The budget low down for investors
Travel claims
Firstly, travel expenses will no longer be allowable for tax purposes. The ATO have identified a widespread rorting of the travel entitlement rules which allow you, as an investor, to claim a tax deduction when you travel to inspect or collect rent on your investment property(ies). It would seem that enough people are unfairly claiming private travel as a deduction to warrant the change in the rules.
Depreciation deductions
Rules are also being tightened around depreciation deductions for plant and equipment items such as washing machines, dryer, furniture, ceiling fans, etc… From budget night, you will only be able to claim a tax deduction if you actually purchased the goods yourself. In the past, successive investors were able to claim depreciation on the same items, well in excess of their initial value. There is an argument that the rules could have been fairer towards investors buying a near new property with near new equipment and who will now not be able to claim depreciation on these items. It seems that the issue does not appear material enough to the government to make the changes more balanced.
Foreign investors
Foreign investors are the most affected by Budget 2017.They will no longer be able to claim primary residence exemption for capital gains tax purposes, in a measure which is expected to bring in an extra $581 million over the next four years.
Moreover, if foreign investors leave their property empty or fail to rent it out for at least six months of the year, they’ll be slugged with a “ghost tax” equal to the foreign investment application fee they paid at the time of application, which will work out to at least $5,000. Foreign investors will also be limited to a 50 per cent of purchases in new developments, to give Australian buyers a better chance of acquiring some real estate.