Rental property travel expenses no longer tax deductible

From 1 July 2017 rental property owners will be unable to claim a tax deduction for travel expenses related to their rental property.  Unfortunately this includes all travel costs eg. to inspect the property, collect rent, perform repairs, collect replacement items or meet with a property manager/tenant.

Medicare levy to increase from 1 July 2019

The Medicare levy (currently 2%) will increase by 0.5% to 2.5% from 1 July 2019 in order to fund the National Disability Insurance Scheme (NDIS).

$20,000 instant asset write off extended for small businesses

Businesses with a turnover of less than $10 million may continue to immediately deduct purchases of eligible depreciating assets costing less than $20,000 that are acquired up to 30 June 2018 and first used or installed ready for use by that date.

Assets valued at $20,000 or more (which cannot be immediately deducted) may be placed in a general small business depreciation pool and depreciated at 15% in the first year and at 30% in subsequent years. If the balance of the pool is less than $20,000 it may be fully written off in that year. After 30 June 2018 the instant asset write-off threshold and the threshold for immediate deductibility of the balance of the pool revert to $1,000.

Superannuation incentives for older downsizers

From 1 July 2018, people aged 65 or over will be eligible to make non-concessional contribution of up to
$300,000 from the proceeds of selling their home. The home must have been held as their principal residence for at least 10 years and is available for each owner (if owned jointly or as tenants in common).

These home downsizing super contributions will not be subject to the age test, work test, contribution caps or $1.6m transfer balance cap.

Investment property depreciation deduction restrictions

From 9th May 2017 plant and equipment (eg. fixtures such as dishwashers and ceiling fans) depreciation deductions for residential real estate properties will be restricted to expenditure actually incurred by investors.

After 9 May 2017 acquisitions of existing plant and equipment items (ie. paid for by a previous owner) will be reflected in your cost base for capital gains tax (CGT) purposes. You will only be able to depreciate plant and equipment of a residential investment property if you actually incur its cost. A subsequent owner will be unable to depreciate items they acquire as part of the property. Instead they can only depreciate the cost of additional items they acquire for the property.

These changes will apply on a prospective basis, with existing investments held at 9 May 2017 grandfathered (ie. the old rules apply).

First home super saver scheme introduced

From 1 July 2017, first home buyers will be able to make voluntary contributions to superannuation which can then be withdrawn with associated deemed earnings to put towards a first home deposit.

These contributions and associated earnings will be taxed at the individuals marginal rates less a 30% offset (non-refundable) and will accelerate the savings of potential first home buyers. Both members of a couple may use the measure.

From 1 July 2017 the measures allow each person up to $15,000 per year and $30,000 in total to be contributed. Withdrawals will be allowed from 1 July 2018 onwards.

Please contact our office with any accounting or taxation questions. 

Download

2017 Federal Budget Tax issues & Tax Planning

Download PDF version

Download