ATO targets property tax breaks

[Aceyducey]

From the AFR this morning (Thanks Pitt_St)


ATO targets property tax breaks
Mar 23
Robert Harley

The Australian Taxation Office is launching a crackdown on one of the most lucrative tax breaks for investors by tightening the depreciation rules on residential investment property.

The move would reduce the tax deductions claimed by investors on new houses and apartments by up to 15 per cent.

It is the first attempt by the ATO to rein in the revenue loss to the federal government from the investment property boom.

Depreciation claims have been a key marketing tool for property promoters because they provide extra deductions that add to the attraction of negative gearing.

The ATO is circulating a proposed determination that will reduce the number of items in a building that can be depreciated quickly as fittings or plant, thereby reducing the deduction from July 1.

Last night, an ATO spokesman said it expected to issue a tax determination shortly that was intended to "provide guidance for taxpayers with residential investment properties in preparation for the next financial year".

.....

The ATO is also reviewing the effective lives to be applied to items of plant. Mr Upton said the ATO was erring on the side of highly conservative lives, which would substantially reduce available deductions.

.....

But Ms Woodward said that "for residential investors, many of whom rely on depreciation to make the investment worthwhile, it could have an impact".

"Annual depreciation claims could be reduced by 10 to 15 per cent," she said.

This is another way to reduce the propensity of people to negatively gear property.

Cheers,

Aceyducey

[Billybob]

It looks like Quantity Surveyors will be in for a very busy time.
Billybob

[Jacque]

And investors will no longer see the attraction in new properties as opposed to old.
Hmm, sounds like we may be in for a correction.....

[Puppeteer]

I dunno.

I read an Article in the Fin Review yesterday, and to me it made quite a bit of sense.

It seems to be more a case of making the depreciation times and amounts more consistent, as apparently there are some discrepencies in the system.

Also, it appears as though it's not so much of the depreciation disappearing, but that some items that are currently plant (and thus depreciable) will now become capital and subject to the longer building depreciation schedules.

Most of the items that they are talking about are things like changing light fittings from plant to capital, and let's face it, how often are light fittings changed in a house. I'd be happy to have them depreciated over the life of the building. If I replace them, then they start again.

The fact is, that many items probably have longer lives than those allowed under the current depreciation schedules.

I think it's more a case of reshuffling the deck a bit, to make the government look like they are taking action against all of us "greedy, wealthy, evil landlords" getting even richer.

Depreciation does help cashflow in the early years of an IP, but if you need the depreciation allowances to make the property purchase a good one then I think that you really need to re-evaluate that property.

Personally I think that this will have little effect on my Investment strategy, and may even make life a little easier for my accountant.