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New depreciation rules for investment properties

December 4th, 2017

New depreciation rules for investment properties

One of the most dramatic changes to property depreciation legislation in 15 years. That is limiting plant and equipment depreciation deductions to outlays actually incurred by investors.

What is Depreciation?

Depreciation is the natural wear and tear that occurs to a building and the assets within it over time.

What is Plant and Equipment?

Plant and equipment assets are items which are considered by the ATO to be easily removable from the property.

In a residential setting some examples include:

  • Hot water systems, heaters, solar panels
  • Air-conditioning units
  • Blinds and curtains
  • Light shades
  • Swimming pool filtration and cleaning systems
  • Security systems.

When do the changes take effect?

The changes will apply from 1 July 2017 to:

  • previously used plant and equipment acquired at or after 7.30 pm on 9 May 2017 unless it was acquired under a contract entered into before this time
  • plant and equipment acquired before 1 July 2017 but not used to earn income in either the current or previous year.

The good news?

It is still within your capabilities as the investor to claim capital works deductions, structure of a building and fixed asset repairs. These mentioned deductions take up on average 85 to 90 percent of an investor’s total claimable amount.

What if I owned the property before the law came in?

Previously existing depreciation legislation will be grandfathered, which means investors who already made a purchase prior to this date can continue to claim depreciation deductions as per before.

Investors who purchase brand new residential properties and commercial owners or tenants, who use their property for the purposes of carrying on a business, are also unaffected.

For information on the Legislation change and media releases please click here to be directed to the Australian Taxation Office.

About the Author

Celestine has been in the Real Estate Industry since 2002. She has competed in some of the most competitive markets in Australia. Combine her strong negotiation skills and keen customer service to achieve the best results for her clients.