Property taxes in 2019: What investors need to know

Here is what investors need to know this year, in order to maximise cash flow and minimise liabilities.


Deductions banned and limited

From 1 July 2017, the government disallowed deductions for travel expenses to investment properties.

Also, for properties bought after 9 May 2017, the government has limited plant and equipment depreciation deductions, to only those expenses directly incurred by investors.


Vacancy charges

Foreign owners of residential properties are required to pay an annual vacancy fee, if their property is not occupied or rented out for more than 183 days - or six months - per year.

The vacancy charge, administered by the ATO, came into effect retroactively from 7:30PM (AEST) on 9 May 2017.

Clearance requirements

From 1 July 2017, vendors selling real property of a contract price of $750,000 and above, down from the previous threshold of $2 million, are subject to foreign resident capital gains withholding tax rate of 12.5 per cent, unless they are able to prove their residency status with a clearance certificate from the ATO.

Australian resident vendors will have to provide a clearance certificate to the purchaser prior to settlement to avoid the 12.5 per cent withholding.

This is a complex system for vendors and buyers alike. 

What’s to come?

Housing affordability is likely to be another high priority for the federal government in its April budget, particularly as it looks to secure votes before the general election.

However, it’s Labor’s plans for property that will be the headline tax changes next year, as it is likely that they will win the next election.

Negative gearing

If elected, the Labor party will limit negative gearing to new housing from a date that is yet to be determined.

Capital gains tax

The Labor party also plans to halve the capital gains discount for all assets purchased after a yet-to-be-determined date after the next election.

In effect, this will reduce the capital gains tax discount for assets that are held longer than 12 months, from 50 per cent to 25 per cent.

On both its negative gearing and capitals gains tax measures, the changes will be grandfathered, which means they won’t apply retrospectively to those who currently hold investment properties.

Marlene Liontis
Monday, 28 January 2019

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