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Are you affected by 2017’s investment property legislation?

By Jamil Allouche

For decades Australians have enjoyed the reliably strong returns of investing in residential property. From rental yield to value growth, there are many boons to owning investment property – particularly in prosperous areas like Brunswick, where CoreLogic reports house values have seen a median increase of 21.72 per cent in the past year.

Such impressive growth is testament to the value of real estate assets. However, as the end of the financial year approaches, investors will need to be aware of key changes to investment property legislation made in November last year.

You can no longer claim travel expenses

Previously, landlords in Australia were able to claim tax deductions on the cost of travel to and from their residential investment properties in order to:

  • Perform maintenance.
  • Conduct inspections.
  • Host property viewings.
  • Collect rent.
  • Any other task contributing to rental income.

However, from this financial year onwards, this will not longer be allowed – increasing the cost of managing your properties.

It's worth noting that this change only affects private investors. Exempt entities, such as professional property managers, are still able to claim these deductions. So, it could be time to consider working with a real estate agent to maintain your rental investments.

Plant and equipment depreciation also cannot be claimed

Upon the acquisition of second-hand residential real estate, shrewd investors know to claim for income tax deductions based on the depreciation of the property.

While you are still able to claim for depreciation on structural works, plant and equipment such as air conditioning, carpets or even rubbish bins will not be eligible for concessions.

This change applies to any second-hand property for which the contracts were exchanged after 7:30 p.m. on May 9, 2017. Fortunately, any properties purchased before this date are exempt, as is commercial, newly built or substantially renovated real estate regardless of the date of contract exchange.

Foreign investors must be proactive in finding tenants

These laws have come into effect in an attempt to improve Australian housing stock and affordability – so it makes sense that foreign investors are now being urged to ensure their properties are reasonably available.

Properties owned by overseas investors must be occupied for at least six months of any 12-month period, or the owner will be liable to pay a "vacancy fee". At the end of the financial year, foreign owners must file an annual vacancy fee return for assessment. Failure to do so will incur the fee regardless of actual vacancy. The fee will generally be equivalent to the initial cost of the foreign investment approval application.

Whether you're a domestic or foreign investor, hiring a property manager to ensure your properties are occupied, maintained and consistently earning rental income is more valuable now than ever. Don't wait, contact the team at Ray White Brunswick today.

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