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Changes to depreciation legislation for Australian Residential Property Investors


As some of you may already be aware, a major change to property depreciation legislation has been implemented. The federal government has passed through a new legislation which will place restrictions on claiming depreciation deductions for second-hand items in properties.

Property investors that exchanged contracts to purchase a second-hand residential investment property after the 9th of May 2017, will not be able to claim depreciation deductions on existing assets such as air conditioning units, solar panels. However, the depreciation on additional assets that the owner adds to the investment property can still be claimed as per usual.

Those who can carry on doing the same

There is good news and that is that there has been no changes to capital works deductions and depreciation to the structure of the property, including fixed assets such as doors, basins, windows or retaining walls therefore they can still be claimed. These deductions usually surmount to 85% – 90% of an investor’s total claimable amount.

Property investors that purchase brand new properties, commercial owners or tenants who use their property for the purpose of carrying on a business are not affected. The proposed changes aren’t applicable to for those who buy property in a corporate tax entity, super fund, or large unit trust. Property investors who purchased a brand new investment property or a substantially renovated property are also not affected and can continue to claim depreciation deductions regardless of when the property was purchased.

Owners of second-hand properties who exchanged after 7:30 on the 9th of May 2017 will still be able to claim depreciation for plant and equipment assets they purchase and directly incur an expense on.

Due to the changes in the legislation and the complexity of depreciation, it is recommended to consult with your accountant to ensure that all deductions are identified and claimed correctly within the ATO guidelines.

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