The government has introduced legislation limiting certain deductions relating to residential rental properties starting from 1 July 2017.

The first measure disallows travel expenses incurred due to the inspection and maintenance of residential rental properties. One catalyst for this change was due to incidences of taxpayers incorrectly claiming travel costs for private usage. This means that expenses such as motor vehicle costs (petrol, registration), airfares, public transport costs, meals and accommodation will no longer be deductible if they have been incurred in relation to residential rental properties.

The second measure limits the ability to claim a deduction for Depreciation on certain items of plant and equipment in residential premises. Under the previous legislation it was possible to claim Depreciation based on a professional estimate of the Depreciable Value of the Plant and Equipment that was acquired together with the acquisition of the Land and Buildings. Under the current legislation a Depreciation deduction will no longer be available for second hand Plant and Equipment used in residential rental properties.

Deductions for travel costs and Depreciation of Plant and Equipment will continue to be available if the costs have been incurred by a corporate tax entity, a superannuation plan that excludes SMSFs, or a unit trust that is widely held and free from control of one member.