SMSFs holding direct property within their investment portfolios could experience an increase in administrative costs from 1 July onward due to changes in the treatment of some expense items.
The changes in question relate to rental properties and the tax treatment for costs incurred in managing these assets.
“One thing trustees will need to become aware of is they won’t be able to go and inspect their properties wherever they maybe, in Australia or overseas, and do maintenance on those properties and receive a [tax] deduction in the fund for travel expenses and things like that,” SuperConcepts SMSF technical and private wealth executive manager Graeme Colley said at a recent industry roundtable.
“It does have a slight impact on the revenue of the fund because you’ll end up paying a little bit more tax if it’s a tax in a superannuation fund because you’re not getting the deduction for the travel expenses and those sorts of things.”
In addition to the change in the tax treatment of these expense items, Colley flagged a modification to the depreciation rules could have a negative impact on SMSFs as well.
“[Depreciation will be assessed as to] whether it is what the government calls a genuine deduction for depreciation,” he said.
According to Colley, whether or not a depreciation charge is considered a genuine deduction by the ATO will depend on whether the value of the depreciable asset is thought to be inflated.