Michael Sukkar (Deakin, Liberal Party, Assistant Minister to the Treasurer) Share this | Hansard source

Firstly, I want to thank all members who contributed to the debate. The 2017-18 budget demonstrates the government's commitment to reducing pressure on housing affordability so that homeownership is more achievable for Australians. This legislation delivers on this commitment by improving the integrity of Australia's tax system and boosting the availability of rental accommodation in the market.

Schedule 1 of the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 amends the Income Tax Assessment Act 1997 to disallow deductions for travel costs incurred in producing or gaining assessable income from residential premises as residential accommodation. The changes mean travel costs for individual investors, such as to inspect and maintain properties, will no longer be deductible. This will stop residential property investors from using the tax system to pay for their holidays by claiming costs as a rental expense. However, these changes don't prevent investors from engaging third parties, such as real estate agents, to provide property management services. These expenses will continue to be deductible. The change to disallow travel expense deductions has an estimated gain to revenue of $540 million over the forward estimates.

Schedule 2 of this bill amends the Income Tax Assessment Act 1997 to limit, from 1 July 2017, plant and equipment deductions for investors in residential investment properties to assets not previously used. There has been an abuse of the tax system when it comes to property investors claiming excessive deductions for plant and equipment items. These changes will improve the integrity of the tax system by better targeting these deductions. Investors who purchase new plant and equipment for their residential investment property after 9 May 2017 can continue to claim a deduction over the effective life of the asset. However, subsequent owners will not be able to claim deductions for those plant and equipment items. These changes will not affect capital works depreciation deductions relating to residential property investments. The change to limit depreciation deductions has an estimated gain to revenue of $260 million over the forward estimates. These changes, together with the change to deny travel deductions, improve the integrity of the tax system and reduce the opportunities for excessive deduction claims.

Schedule 3 of this bill, along with the imposition bill, implements an annual vacancy charge on foreign owners of residential real estate where property is not occupied or genuinely available on the rental market for at least six months in any 12-month period. The vacancy charge builds on the government's existing foreign investment regime, which seeks to increase the number of houses available for Australians to live in. The charge provides a financial incentive for the foreign owner to make their property available on the rental market. The charge payable will be equivalent to the residential application fee that was paid by the foreign person at the time the application to purchase the property was made to the Foreign Investment Review Board. The vacancy charge applies to foreign persons who make a foreign investment application for residential property from 7.30 pm on 9 May 2017. For eligible foreign owners of residential real estate the vacancy charge will be levied on an annual basis. The annual vacancy charge is expected to result in greater use of foreign owned properties. Reporting and notification requirements are also expected to provide greater visibility of vacancy rates for foreign owned properties. The Australian Taxation Office will administer the vacancy charge. The changes contained in the legislation have been designed to open up the residential rental market and strengthen the integrity of Australia's tax system. I therefore commend the bills to the House.

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