In one of the most dramatic changes to property depreciation legislation in more than 15 years, Parliament has passed the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 as at Wednesday 15th November 2017, with the Bill now legislation.
Watch the short video below to learn about the key points of this new legislation.
The new legislation means owners of second-hand residential properties (where contracts exchanged after 7:30pm on the 9th of May 2017) will be ineligible to claim depreciation on plant and equipment assets, such as air conditioning units, solar panels or carpet. This includes new property that was purchased after this date where the owner lived in it before renting it out.
The good news is that there are still thousands of dollars to be claimed by Australian property investors, as there has been no change to capital works deductions, a claim available for the structure of a building and fixed assets such as doors, basins, windows or retaining walls. These deductions typically make up between 85 to 90 per cent of an investor’s total claimable amount.
Previously existing depreciation legislation will be grandfathered, which means investors who already made a purchase prior to this date can continue to claim depreciation deductions as per before.
Investors who purchase brand new residential properties and commercial owners or tenants, who use their property for the purposes of carrying on a business, are also unaffected.
Owners of second-hand properties who exchanged after 7:30pm 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.
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. Each and every BMT Tax Depreciation Schedule will be tailored to suit an individual’s property investment scenario, ensuring that all deductions are maximised.
For investors who are planning on selling a property affected by the new rules, a BMT Tax Depreciation Schedule can be provided to assist them and their Accountant to perform a calculation adjustment for CGT liabilities.
For further information on any property investment scenario, speak with one of the expert staff at BMT Tax Depreciation on 1300 728 726.
Find out more about the new depreciation legislation by downloading our white paper here: Essential facts: 2017 Budget changes and property depreciation.
Hi
Just wondering
1) What if the first home buyer purchased the property before 9th May 2017, and and lived their place for first 6months and rent out from Nov 2017?
Are they still eligible to claim the benefit?
2) what if the first home buyer purchased the property before 9th May 2017 and rented out first 6months and move in at Nov 2017 and later a year they rent out again maybe sometime in nov 2018? Are they still eligible to claim the benefit? Or is it just the first 6months they rent out the place to tenant?
Thanks
Hi Kay,
Thanks for getting in touch.
In the first scenario, the owner would not be entitled to claim depreciation for plant and equipment assets. Under the new legislation, a property owner will not be able to claim depreciation on pre-existing plant and equipment assets within properties which have been lived in as a primary place of residence where the owner decides to rent the property out after the 1st of July 2017. Plant and equipment assets within this scenario are considered previously used.
In the second scenario, the owner would only be able to claim depreciation for plant and equipment assets for the first six-month period where it was rented out. They would not be able to claim these benefits if they decide to rent it out again. Since it stopped being a rental after the 1st July, the legislation kicks in for any future re-introduction of classifying the property as a rental.
The good news in that in both situations, the owner will still be able to claim building write-off, provided the property was constructed after the 15th of September 1987. This generally makes up 85-90 per cent of a depreciation claim, so it is likely there’d still be significant deductions to be found.
Thanks,
BMT Team
Can you please confirm what are the new changes if you are selling an investment property which you had it either before 9th may or after 9th may 2017 on which you have already claimed depreciation, will you have to pay back when selling the property, or there is no change on that?
Hi Rohit,
Thanks for your question.
When selling an investment property you have claimed depreciation for, whether you purchased it before or after the 9th of May 2017, you may need to pay back these deductions in the form of Capital Gains Tax (CGT). This is a complex matter and something we recommend speaking with your Accountant about should you be selling your investment property, or planning to sell in the future.
Depending on your circumstances you may be eligible for a CGT exemption or discount. You can read more about this here – https://www.bmtqs.com.au/maverick/mav-39-exempt-from-paying-CGT and here – https://www.bmtqs.com.au/bmt-insider/six-capital-gains-depreciation-facts-property-investors/
For more information on how CGT will impact those properties affected by the budget changes, please refer to page 10 of our budget whitepaper – https://www.bmtqs.com.au/documents/essential-depreciation-facts-2017-budget.pdf
Hi there.
From my readings this change will apply from 1 July 2017.
This means depreciation from date of purchase (after 9 May) to 30 June 2017 will still still be deductible.
Please confirm you thinking on this point.
Cheers.
Kevin Frazer
Hi Kevin,
Thanks for your question.
These changes apply to depreciation of plant and equipment assets in second-hand residential properties which exchanged contracts after 7.30pm on the 9th of May. This means that if a property was purchased between the 9th of May 2017 and the 30th of June 2017, the owner will not be able to claim depreciation on previously used plant and equipment.
There is an exception to this date which relates to the renting out of a primary place of residence. A property owner will not be able to claim depreciation on pre-existing plant and equipment assets within properties which have been lived in as a primary place of residence where the owner decides to rent the property out after the 1st of July 2017. Plant and equipment assets within this scenario are considered previously used and cannot be claimed .
Thanks,
BMT Team