Normally my blog posts are focused on motorsport-related issues. Not today.
The Federal Budget was delivered last night and once you cut through the hyperbole and rhetoric, there were some interesting details in the policy announcements. One in particular immediately struck a nerve with me, as it’s one that affects my personal bottom line: the outlawing of being able to claim a tax deduction on travelling expenses for inspecting investment properties.
As a New South Wales resident who owns two investment properties in Victoria, this is something I’m a bit miffed about.
Reading some of the newspaper articles this morning has been an interesting exercise. One such story began with the opening paragraph “High-flying property investors will have their wings clipped…”
This pretty much sums up a real perception problem about property investors, and I’d like to clear up a couple of misconceptions.
Firstly, we’re not all owners of multi-national corporations with multi-million dollar property portfolios and secondly, one of the reasons we’re investing in property is because we’re aiming for the long-term goal of self-funded retirement, something which ultimately saves the government (and therefore taxpayers) money.
I’ve never been on an income higher than the average wage. But by living frugally I was able to save enough for a deposit on my first investment property which I purchased in 2013. More hard work and saving to get enough equity in that property, and I was able to buy another one last year.
Both properties are in regional Victoria because they were the areas within my price range.
While both places are overseen by local property managers, I’ve discovered it’s worth making an annual trip to each of them. As well as keeping the property managers on their toes, these trips allow me to look for any maintenance or improvements that are needed. Looking at photos sent through from a property manager is not the same as actually being there.
So what effects will the removal of tax deductions on investment property inspection trips have?
I believe many investors will visit their properties far less frequently. This is fine if there is a good property manager in place, but it means there will be a lot more trust placed in property managers, and there will be some who may not be as rigorous in their management duties.
Also, it means businesses that made income out of property investors travelling – airlines, rental car companies, accommodation venues and so on – will miss out on some of that income.
And finally, it means people will be less likely to invest in areas away from where they live. In hindsight, this is something I might have looked at if I had seen this policy coming, but it’s too late now. And the reason I chose the areas I did is because they were within my price range and had good growth prospects.
So yes, there might be some “high-flying” property investors who have been able to take tax deductible holidays masked as property inspections, but the implementation of this policy spoils it for the rest of us who were visiting our properties for the right reasons… not happy Jan!
That’s my political rant over and I promise I will return to my motorsport ramblings next time.