Budget concerns residential investors

IMPACT: The Real Estate Institute of Australia calls for the Federal Government to change the budget initiative concerning residential property investors. According to the REIA, these changes may impact on housing affordability and regional growth.
IMPACT: The Real Estate Institute of Australia calls for the Federal Government to change the budget initiative concerning residential property investors. According to the REIA, these changes may impact on housing affordability and regional growth.

The Real Estate Institute of Australia is calling for the Federal Government to make changes on a budget initiative concerning a group of property investors.

New restrictions will no longer allow investors to claim tax deductions for travel to inspect their residential investment property.

Malcolm Gunning, president of the REIA, said he supports the curbing of tax deductions. 

But he doesn’t believe the decision has been fair because the same rules have not been applied to investors who own commercial property.

“These initiatives are contrary to this principle with the budget initiative of not allowing for travel to inspect residential investment property, meaning that an investor who owns a commercial investment property can claim deductions for their annual site inspection travel costs, but an investor who owns a residential property cannot,” Mr Gunning said.

“These two initiatives are contrary to the principles of a good tax system and the ATO has existing means for addressing abuses and excesses.

“One of these principles is neutrality, which in essence means that two tax payers in similar circumstances should be treated the same,” he said.

The president of the REIA said this initiative may also have a bad impact on housing affordability and growth in regional areas.

“Ironically these changes will do nothing to improve affordability in Sydney and Melbourne and indeed it may make it worse as investors in these two cities are discouraged from investing in locations other than their home towns.

“Anecdotal evidence is indicating that as Sydney and Melbourne prices have increased investors are turning to non-metropolitan locations.

“This regional investment brings employment for a multitude of regional services. This measure will put a brake on this trend.”

However, he said another issue are initiatives favouring investors that buy new property, versus those purchasing property that is 12 months old.

“Regarding the proposal to restrict depreciation claims to items purchased and installed in the property by the claiming taxpayer, REIA believes, like travel, it doesn’t treat the investor buying a property that is 12 months old the same as one buying a new property.

 “We believe it will distort the market by making properties that are not new less desirable and the impact on affordability is questionable and may even worsen affordability. Existing investors hold on to their property and new investors push up the price of new property which are currently showing signs of easing.

"These changes appear to be more about politics than good policy.”

This story Budget concerns investor group first appeared on St George & Sutherland Shire Leader.