On 15 November 2017, the Federal Government passed legislative amendments changing the Income Tax Assessment Act 1997 which prevents people from claiming depreciation on “previously used” plant & equipment in second-hand investment properties purchased AFTER 9 May 2017.
Now, investors owning “old or second-hand” properties can claim depreciation allowances ONLY on new items such as white goods, hot water system, air conditioners, purchased and installed to improve the value of the income producing properties.
Property owners whose principal place of residence is being used to generate rental income, can claim depreciation on plant & equipment, ONLY if the property became an investment before 1 July 2017. Additional assets purchased and installed to enhance the property after 1 July 2017 will be eligible for depreciation as well.
Newly built investment properties purchased directly from Developers or Builders with plant and equipment items included in the sale are eligible for depreciation allowances. No date restrictions apply to these properties.
The depreciation allowance on structural elements of the buildings of existing and new investment property remains the same.
Renovations on existing investment properties maybe included as depreciation deductions. Keep accurate records of all renovations to capture all the costs of the renovation in as much detail as you can get from either the builder or the individual trades companies that carry out the work for you, as this will make it a lot easier to create a new depreciation schedule.
Remember to document other costs, such as design fees, permits and so on, and either add these into the depreciation schedule or get advice from your accountant as to how these costs may be taken up in your tax return.