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10 May 2018
3 minute

Tax Depreciation Legislation Changes - Recap on the year that's past

Written by Tuan Duong
Founder & Director

A recap of the year that's past with changes to Plant and Equipment Depreciation

As we approach the end of financial year for 2018, Duo Tax Quantity Surveyors look back to see the impact and reach of legislation. In summary, most investors we come across have no idea about the changes. The change can result in a loss of up to $50,000 worth of tax deductions if not understanding their eligibility criteria. Making it more critical than ever to have the QS determine feasibility of depreciation on any rental property.

Well before the recent legislation changes to depreciation on rental properties, most would already question the feasibility of obtaining depreciation. The problem is only worse with the evermore stringent rulings. The legislation effectively will disallow property investors from claiming depreciation if you purchase or exchange contract after the Budget night. The Federal Budget night took place at 7:30pm on the 9th of May 2017 and outlines proposals to amend legislation.

It's worthwhile noting that legislation changes only affect Plant and Equipment or Fixtures and Fittings. This is Division 40 of the Income Tax Assessment Act and has no bearing on claims of Capital Works or Building Allowance depreciation.

Now with the recent changes it becomes even more difficult to adequately ascertain if a depreciation schedule is a viable option for you.

Legislation changes affecting Depreciation in a nut shell

To give you a quick rundown of the legislation changes, we have list below the key changes to identify ineligibility:

  • Depreciation on the fixtures and fitting you can no longer claim if:
    • You purchase this property second-hand (not brand new)
    • You purchase this property after the 9th of May 2017
    • You made this purchase prior to 9th of May 2017, however not make available for rent in 16-17 Financial Year

Under what circumstances would I qualify for depreciation? Here are a few examples:

  • You purchase the property well before 9th of May 2017 and make available for rent since purchase
  • You purchase the property either before or after Budget night and it is built after 17th September 1987
  • You purchase the property after Budget night, however it is built prior to the cut-off date of 17/09/1987 but major renovations have been undertaken by you or others before you
  • The property you purchase is not owned by individuals or a Self Managed Superannuation fund but another entity i.e. company
  • The property you purchase operates as  commercial property and will be eligible for depreciation regardless if new or second-hand

Under what circumstances would I be disqualified for depreciation? Here are a few examples:

  • You purchased the property well before Budget night. However between 1/7/16 and 30/6/17 you made no attempt to rent it out
  • You purchased the property well before Budget night. You may have had it for rent however switch it to owner- occupy. Thereafter when switching it back to investment, you will disqualify yourself from claiming depreciation on fixtures and fittings however may still claim capital works (building depreciation)
  • You purchase the property after Budget night and the building is built well before 1987 (no capital works deductions)
  • You purchase the property after Budget night and there are no notable renovations or improvements

The above cases are difficult to identify if you do not have the right research and real-estate tools to identify. That is why Duo Tax Quantity Surveyors can provide free consultation to give you hard facts about your property's build date, purchase date and even look up renovations. Relying on these facts along with online database photos of your property, we can provide guaranteed deductions prior to commencing any work. This gives every client of ours tax-deduction guarantees before the job starts. Resulting in 100% customer satisfaction each and every time.

There is much complexity that revolves around tax depreciation and these new changes. The soundest advice we can offer all property investors is to ask a Quantity Surveyor the question:

"This is my investment property's address and what is my entitlement as a tax payer?"

Click here and contact us to ask your question or try our Depreciation Calculator


Disclaimer: Please note that every effort has been made to ensure that the information provided in this guide is accurate. You should note, however, that the information is intended as a guide only, providing an overview of general information available to property investors. This guide is not intended to be an exhaustive source of information and should not be seen to constitute legal or tax advice. You should, where necessary, seek a second professional opinion for any legal or tax issues raised in your investing affairs.
Tuan Duong is an award winning Quantity Surveyor and leads Duo Tax Quantity Surveyors – Australia’s fastest growing provider of Tax Depreciation. Reach out to him directly on 0431 154 356 or email tuan@duotax.com.au
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