On 15 November 2017, Parliament passed the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017, which brought about some major changes to ‘plant and equipment’ depreciation claims.
Plant and equipment depreciation refers to the deductions an investor can claim for the wear and tear that occurs to the fixtures and fittings located within a property. They are referred to as assets, which are considered by the Australian Taxation Office (ATO) to be easily removed from the property. Investors can claim depreciation deductions for more than 6,000 different ATO recognised assets, such as the carpets, blinds, dishwashers, hot water systems, smoke alarms and ceiling fans.
Each of these assets is assigned an individual effective lifespan and depreciation rate by which depreciation of the asset is calculated. The depreciation rates and effective lives of all ATO specified plant and equipment assets differ by each individual asset and even by individual industries. The ATO recognises that plant and equipment items will wear out more quickly than the building itself and will likely need replacing sooner.
The legislation changes mean that owners of second-hand residential properties (where contracts exchanged after 7:30pm on 9 May 2017) can longer claim depreciation on existing plant and equipment assets located within their property. However, owners of affected properties can still claim depreciation on the ‘plant and equipment’ assets they purchase for their property directly.
It is important to note that there are still thousands of dollars to be claimed by Australian property investors, as there has been no change to ‘capital works’ deductions, or building write-offs, which typically make up between 85 to 90 per cent of an investor’s total claimable amount.
Investors who have already purchased prior to this date can continue to claim depreciation deductions as before.
It’s more important than ever to work with a specialist Quantity Surveyor to ensure that all deductions are identified and claimed correctly under the new legislation.
BMT Tax Depreciation will show you how to claim more deductions, pay less tax and see a greater return on your investments. BMT Tax Depreciation schedules are designed specifically for ease of use by Accountants to incorporate depreciation deductions into an investors’ income tax assessment. All information is prepared in full compliance with ATO regulations, meaning that deductions are detailed and evidenced correctly in the event of an audit.
Alternatively, you can contact one of our expert staff on 1300 728 726 for a free estimate of available deductions.
To read more about the new depreciation legislation and how this applies to a range of property investment scenarios, download our comprehensive white paper document – Essential facts: 2017 Budget changes and property depreciation.