Property investors to lose depreciation deductions on furniture: 2017 Budget

The 2017 Budget sees rules being tightened around what can be claimed by property investors, specifically around depreciation deductions.

Under new rules coming into effect from July 1, depreciation deductions for plant and equipment items such as washing machines and ceiling fans will only be allowed if the investor actually bought them.

Of the nation's 2 million landlords, about 1.3 million are negatively geared.

It is described as an “integrity measure.”

It is intended to address concerns that items are being claimed as tax write-offs by successive investors in excess of their actual value.

It is calculated to claw back $260 million over the next four years of the budget.

The changes will apply to any items purchased after budget night, May 9, but existing investments will be grandfathered.

"Acquisitions of existing plant and equipment items will be reflected in the cost base for capital gains tax purposes for subsequent investors."

Those investments will continue to give rise to deductions for depreciation until the investor no longer owns the asset or the asset reaches the end of its effective life.

Assets purchased after budget night will attract a deduction over the effective life of the asset but subsequent owners will not be able to claim deductions on that asset.

Investors will also no longer be able to claim tax deductions for travel expenses “related to inspecting, maintaining or collecting rent for a residential rental property” from July 1.

The government expects the travel changes to bring in an extra $540 million in revenue over the next four years.

It intends to use the “integrity measure” to fund a first-home buyers’ scheme, which will allow $30,000 to be salary sacrificed into a superannuation account at a concessional tax rate.