Mixed Use Assets hit by new rulings

photo of a private plane, which can be mixed use assetsAs if the removal of building depreciation for residential property investors wasn’t a big enough blow, the Government will soon be changing the rules around mixed use assets.  The expenses relating to boats, aircraft and bach have been considered at least partial tax deductions for those who were willing to rent them out or use them for business at least part of the year.

The government outlined in the 2012 Budget proposed amendments for treatment of mixed use assets and their tax deductibility relating to expenses to maintain those assets.  These changes in the main will reduce the asset holder’s ability to offset costs of retaining the asset by occasional rental of the asset.  Owners will still be required to apportion use of the asset for either taxable or non taxable deductions but rules as to which category the use falls into have changed.  If you have a mixed use asset such as a boat, bach, aircraft etc. you will need to take note of the following:

Assets falling into apportioning rules are:

  • Owner or relative using the asset privately
  • The asset is used as an income earner
  • The asset is unused for more than 62 days
  • It costs over $50,000

These rate changes are not law as yet but it is anticipated that once they are they will apply to the following financial year.  It is possible that proposed changes to mixed use assets apportionment may also encompass deductibility of interest if more than one entity is involved.  Talk to us if you think these changes may impact on you, they could be significant. We will advise you of any updates as soon as we have them.