3 things to think about before buying a holiday home
A holiday home is great for knowing you can get away whenever the urge takes you. However, what should you consider before making an investment?
In May 2017, the government proposed changes to depreciation legislation. The legislation was passed by the Senate the following November, and with the end of the financial year approaching it's important for property investors to be aware of the key changes introduced by the new legislation.
The new legislation will affect all properties purchased after 7.30 p.m. (AEST) on May 9, 2017. Also note that the legislation applies only to second-hand houses. Investors who have bought brand new in the last 12 months will be unaffected.
In the past, Australian landlords were able to claim tax deductions on the cost of travelling to and from their rental properties. This was perfectly legal, so long as the travel had been undertaken in order to:
This was quite a benefit for investors who own several rental properties, as it allowed essential work to be done in relation to the houses without costing extra. Under the new legislation, private investors will have to foot the bill for travel expenses themselves.
Savvy investors will know they can claim on the degradation of the property. In this case, the tax payable is reduced to account for the difference between their mortgage repayments and what their rental property earns in rent. Prior to the new legislation, investors could also claim against depreciation of fittings, fixtures, appliances and HVAC systems.
This is no longer the case – plant and and equipment concessions are now off the table. Note that if you as an investor purchased new, and decided to rent out the property after the May 9 date, you cannot claim plant and equipment deductions as these assets are considered used.
The legislation has come into effect to boost the stock of Australian homes, and as such, the rules have changed a little bit for foreign investors. Rental properties owned by offshore investors must be occupied for six months of any 12 month period. These homeowners will need to provide proof of tenancy, and if they should fall short they'll be subject to a "vacancy fee."
If you're a homeowner in Bunbury, having a property manager can help you navigate the tricky legal requirements of your investment property. Get in contact with Ray White Bunbury now to find out more about our services.
Meta – May 2017 saw the proposal of changes to property depreciation legislation. The changes came into effect in November, but with the end of the financial year in sight, what do property investors need to know moving forward? How will the new legislation affect Australian investors and those from abroad?
A holiday home is great for knowing you can get away whenever the urge takes you. However, what should you consider before making an investment?
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