Alert: Residential Property Deductions

The ATO have made the following changes, applicable from 1st July 2017:


1. Disallow the deduction of travel expenses for residential rental property...

From 1 July 2017, travel expenses relating to inspecting, maintaining, or collecting rent for a residential rental property cannot be claimed as deductions by investors. The changes are now law. The travel expenditure is also not recognised in the cost base of the property for CGT purposes.

You can continue to deduct travel expenditure if:

  • the losses or outgoings are necessarily incurred in carrying on a business for the purposes of gaining or producing assessable income; or
  • you are an excluded class of entity.

2. Limit plant and equipment depreciation deductions to outlays actually incurred by investors...

Income tax deductions for the decline in value of previously used plant and equipment in rental premises used for residential accommodation are no longer allowed. The changes are now law.

The changes apply from 1 July 2017 to:

  • previously used plant and equipment acquired at or after 7.30 pm on 9 May 2017 unless it was acquired under a contract entered into before this time
  • plant and equipment acquired before 1 July 2017 but not used to earn income in either the current or previous year.

Investors who purchase new plant and equipment will continue to be able to claim a deduction over the effective life of the asset.

The changes do not affect deductions that arise in the course of carrying on a business, or for investors who are an excluded class of entity.

An excluded class of entity is:

  • a corporate tax entity;
  • a superannuation plan that is not a self-managed superannuation fund;
  • a public unit trust;
  • a managed investment trust; or
  • a unit trust or a partnership, members of which are entities of a type listed above.

Please do not hesitate to contact Westmount or your Accountant if you have any questions regarding the above.