The Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 was introduced in the House of Reps Thur 7.9.2017. It proposes to amend the Tax Act to implement 2 measures announced in the 2017-18 Federal Budget – one denying deductions for travel expenses concerning residential premises, and the other restricting depreciation deductions for assets used in rental properties.
Travel expenses
The Bill would seek to ensure that travel expenditure incurred in gaining or producing assessable income from residential premises is: (i) not deductible; and (ii) not recognised in the cost base of the property for CGT purposes. The amendments are not intended to affect deductions for institutional investors in residential premises. The amendments also would not affect deductions for travel expenditure incurred in carrying on a business, including where an entity carries on a business of providing property management services.
DATE OF EFFECT: The amendments would apply to losses or outgoings incurred on or after 1 July 2017.
Depreciation deduction limitations
The Bill proposes to deny income tax deductions for the decline in value of "previously used" depreciating assets used in gaining or producing assessable income from the use of residential premises for the purposes of residential accommodation. However, the amendments would not affect deductions that arise:
- in the course of carrying on a business; or
- for corporate tax entities, superannuation plans other than SMSFs, public unit trusts, managed investment trusts and unit trusts or partnerships, all the members of which are entities of a type listed here.
The proportion of the decline in value of an asset that cannot be deducted would be recognised as a capital gain or loss when the asset ceases to be used.
DATE OF EFFECT: The amendments would apply in income years commencing on or after 1 July 2017 unless:
- the asset was acquired by an entity before, or under a contract entered into before, 7.30 pm on 9 May 2017; or
- the start time for the asset occurred during or before the income year containing 9 May 2017 and the entity was not entitled to a deduction under Division 40 or Subdivision 328-D of the ITAA 1997 for the asset in that income year.
If you have any questions about how the proposed travel and depreciation changes apply to you, please don't hesitate to contact Robert Goodman Accountants on 07 3289 1700.
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