Whilst negative gearing remains available to landlords, rules are being tightened around what can be claimed, specifically related to travel expenses and depreciation deductions.

Under the new rules, which will come into effect from July 1, depreciation deductions for plant and equipment items (such as dryers, curtains and ceiling fans) will only be allowed if the investor actually bought them.

In the past, investors were able to claim deductions for all plant and equipment items in the property at the time of acquiring the asset, according to each item’s effective life.

This new ‘integrity measure’ is expected to help the ATO retain $260 million over the next four years.

The changes will apply to any items purchased after budget night (Tuesday May 9), but existing investments will be grandfathered (ie exempt from the change).

In another blow to investors’ returns, a new negative gearing restriction has been introduced in relation to travel expenses.

As of July 1 2017, investors will no longer be able to claim tax deductions for travel expenses “related to inspecting, maintaining or collecting rent for a residential rental property”.

Introduced in an effort to “address concerns that many taxpayers have been claiming travel deductions without correctly apportioning costs, or have claimed travel costs that were for private travel purposes”, this change is set to save the government around $540 million over the next four years.