MARGARET LOMAS SAYS

While the proposed 2017 Federal budget stopped short of removing negative gearing for property investors, it did contain some surprising changes which no one really saw coming.

Property Investors can no longer take a tax paid trip to inspect their property twice a year.  I think this is an acceptable change, as spruikers would market often over-priced property in tropical locations on the basis that investors could get a holiday on the tax office.  This tended to encourage investors to buy based on these benefits rather than the underlying quality of the asset. Build a good team of people in the area where your property exists and have them do this menial work for you while you use your time to seek out more investing opportunity.

The ability to claim depreciation on plant and equipment has now been confined to only brand- new properties. Depreciation on the building remains untouched, but any established property bought under a contract signed after 9 May 2017 loses plant and equipment deductions.

To some extent, I think this is a step in the right direction, as in its present form the rule allows you to get a new effective life (that is, start the life all over again) even on assets which have been written down to nil. However, I can’t see how it’s fair to take away the right of a residential investor to at least claim any remaining depreciation on plant and equipment on second hand residential property items, when this same right remains for commercial property investors and businesses.

What remains to be seen is just how the anomalies are dealt with and how it is all implemented.  Discussions are underway with key industry stakeholders, so we wait with bated breath to see just what will transpire.  Once I have more information around these changes, I’ll write them up in another article, along with details of other changes for property investors, so look out for that.

Margaret Lomas is the Founder of Destiny Financial Solutions, Skynews business’ resident property expert and author of eight best-selling property investment books.

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