CHANGES TO PROPERTY DEPRECIATION
Contributor: Ridhwan Hannan, Senior Tax Advisor from OnePath Accountants
FEDERAL BUDGET CHANGES TO DEPRECIATION
Recently, in ‘Property Depreciation 101’ I wrote a post, about how to calculate depreciation on investment properties.
Since then, the Federal Government has announced some changes to the depreciation legislation that you should be aware of.
WHAT ARE THE CHANGES?
Investors can no longer claim depreciation on plant and equipment unless it was purchased by them.
So, if you purchase an existing property that has a dishwasher, for example, you will not be able to claim depreciation on the dishwasher.
If, however, you purchase a property and install a new dishwasher, then you should be able to claim depreciation on this.
DOES THIS AFFECT EXISTING INVESTORS?
The new legislation only applies to properties purchased after the 9th of May, 2017. For investors who have exchanged contracts before this date, depreciation on plant and equipment can still be claimed in the same way.
So, if you have been claiming on plant and equipment for properties that you purchased before the cut-off date, the new laws won’t affect you.
WHAT ABOUT COMMERCIAL PROPERTIES?
The new legislation only applies to residential investment properties, so those who purchase shops, factories and offices, for instance, will still be able to claim on plant and equipment in the same way.
WHAT IF I PURCHASE A BRAND NEW PROPERTY?
Investors will be able to claim depreciation on plant and equipment for brand new properties which an owner builds themselves or buys directly from a developer.
WHAT ABOUT RENOVATED PROPERTIES?
It looks like investors will be favouring older properties as they won’t be able to claim depreciation on many recently renovated items, unless they carry out the renovation themselves.
However, regardless of renovation status, investors should still be able to claim depreciation on building allowance.
DO I STILL NEED TO GET A DEPRECIATION REPORT?
It is still a good idea to get a quantity surveyors report so that you have an accurate picture of the capital works deduction you can claim.
Also, you may need to know the value of the plant and equipment at the time of purchase as this will be reflected in the cost base for capital gains tax purposes for subsequent investors.
In any case, a good property minded accountant can help you sort out the new rules when it comes to claiming depreciation.
Ridhwan Hannan is a property investor and a Senior Tax Advisor from OnePath Accountants
You can contact Ridhwan at email@example.com or 1300 686 069