Your landlord clients need to be prepared to lose this deduction

New legislation recently tabled in Canberra puts a measure first announced with the last Federal Budget closer to reality. Your landlord clients need to be prepared to lose this deduction

The Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 (you can read the details here) solidifies the government’s intention to deny all travel deductions relating to inspecting, maintaining, or collecting rent for a residential investment property.

Once enacted, the measure will apply from July 1, 2017 — so will affect relevant clients for the entire current financial year.

It is intended that travel expenditure incurred in gaining or producing assessable income from residential premises used as residential accommodation will not be deductable. The travel expenditure will also not be recognised in the cost base of the property for CGT purposes.

Taxpayers will be able to 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
  • they are an “excluded class of entity”.

The ATO explains these as being:

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

The accompanying Explanatory Memorandum states that the amendments to the rules will “improve the integrity of the tax system by addressing concerns that some taxpayers have been claiming travel deductions without correctly apportioning costs, or have claimed travel costs that were for private purposes”.

However it is also explained that the measure is not intended to affect deductions for institutional investors in residential premises, as “the same integrity concerns do not arise for such investors”.

The amendments also do 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.

Your landlord clients need to be prepared to lose this deduction Your landlord clients need to be prepared to lose this deduction Your landlord clients need to be prepared to lose this deduction

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