Legislation impacting on travel expenses and plant and equipment deprecation are one step away from coming into effect, being previously labelled by one expert as a ‘sledgehammer’ approach.
The Turnbull government has passed both The Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Vacancy Fees) Bill 2017 through both houses of Parliament, only requiring royal assent from the governor general to come into effect.
These changes, should they get the green light from the governor general, remained mostly unchanged from their draft legislation, as mentioned previously for the plant and equipment reforms and foreign investor reforms.
As they stand, these bills, if turned into acts, will impact investors through the following legislation:
Under the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Vacancy Fees) Bill 2017:
Foreign investors will be hit with a fee starting from $5,500 for a property purchased for $1 million or less if their property has been occupied for less than 183 days in a year;
Will penalise those who fail to submit or keep records, with a fee of $52,500; and
Come into effect retroactively from 7.30pm, 9 May 2017.
Under The Treasury Laws Amendment (Housing Tax Integrity) Bill 2017:
Individual investors will be unable to claim travelling costs for deductions;
Only allow assets to be deducted for the first time they are installed or used in a residential property;
Come into effect retroactively from 1 July 2017.
In a joint statement by Treasurer Scott Morrison and Assistant Minister to the Treasurer Michael Sukkar, these changes will help housing affordability and private renters.
“The vacancy charge builds on the Turnbull government’s strengthened foreign investment regime to increase the number of houses available to live in,” the statement reads.
“The charge provides a financial incentive for the foreign owner to make their property available on the rental market, helping provide more homes for Australian families.”
In regards to the Housing Tax Integrity Bill, these measures are described as curbing investors who attempt to exploit the tax system.
“This [travel cost deductions reform] will improve the integrity of the tax system by preventing residential property investors from taking holidays at taxpayers’ expense,” the statement said.
“Limiting plant and equipment depreciation deductions will remove the existing opportunities for items to be depreciated by multiple owners in excess of their actual value.”
Earlier this year, Tyron Hyde of Washington Brown claimed the then-drafts were a “sledgehammer approach” to improving investment integrity.
Despite asking for public inquiry, Mr Hyde believed the government essentially paid “lip service” to investors, and had no intention of actually implementing ideas from investors.
“The public inquiries … once they’ve made their public statement, it’s gone, … it’s too late. They do it, I think, sometimes unfortunately, for a bit of show, to show they’re doing these things in good faith,” he said.
With the legislation now passed, Mr Hyde predicted the legislation may be a repeat of what occurred in 2004 with the government introducing a 2.25 per cent fee for the sale of property, which caused property owners to stop selling property.
“The same thing could happen here. The people who own existing properties may simply forget or not want to sell that and continue to claim the depreciation. Therefore, guess what the government’s not going to get a lot of?” he said.
“Capital gains tax, because they’re not going to transact.”
This will definitely effect me as my rental is 180km away and i do visit quite regularly to maintain the garden, paddocks and so on. Instead of being relaxed about purchases i will keep every receipt and make sure i claim every cent.
I'm sure millionaire chinese investors will be affected by the $5,500
