Negative Gearing Changes 1st July 2017: Travel Expenses

Negative Gearing Changes: Removal of travel expenses for residential rental property.

Are you an investment property owner or intend to purchase one in the near future? Not only can holding an investment property benefit you through capital gain in the longer term, it can also help in saving taxes! Many investment property owners or those who have an understanding of investment properties are aware about negative gearing and how one can save hundreds, sometimes thousands of dollars on tax!

These negative gearings occur when the expenses that you have spent in relation to your property is higher than the income that you have earned from the property. These expenses being for example, interest on the mortgage, depreciation, repairs, council rates and water bills.

However, from the 1^st of July 2017 there will be some changes which may affect the expenses that you will be claiming against your rental property income to maximise the negative gearing effect.

One of these changes is to the travelling costs associated with the maintenance of Investment properties.

What are the changes?

The removal of travel expense: The removal of claiming of travel expense from inspecting, maintaining or colleting rent for an investment property. These expenses will also not be recognised in the cost base of the property for Capital Gains Tax purposes. These changes were made due to the number of tax payers, who have been claiming travel expense without correctly apportioning the cost between what amount was for rental property purpose and private travel purposes.

When does it apply?

The rule comes into effect from 1^st of July 2017 onwards.

How will this affect you?

With the restriction on claiming deductions, investors are predicted to reduce the ability to offset the negative gearing of the investment property against their assessable income.

Exceptions to the rule

There are two exceptions to the rule where you can continue to claim travel expenditure as an expense.

1. If you are an excluded class of entity such as a corporate tax entity, a superannuation plan that is not an SMSF, public unit trust, managed investment trust or a unit trust/partnership
2. If there are losses/outgoings incurred in carrying on a business for the purpose of gaining/producing assessable income.

Although the removal of the travel expense could mean losing hundreds of expenses especially with those who have property overseas, do not worry! We at A One Accountants have prepared countless number of rental property tax returns and we will be able to assist you to make sure that you claim as much eligible expenses as you can.

If you need any assistance with your investment property tax return or have any queries regarding the changes, feel free to give us a call on 03 8609 1889 and our well trained consultants will be more than happy to assist in maximising allowable deductions to get you the best possible refunds.