New depreciation legislation for Australian property investors

BMT team — Fri, 17 Nov 2017 01:13:39 +0000

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.

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Treasury Laws Amendment Bill to impact property investors

BMT team — Wed, 13 Sep 2017 23:39:10 +0000

Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 was introduced into parliament on the 7th of September 2017 and included legislation changes which will negatively affect residential property investors across Australia. Announced in the 2017 Federal Budget, the amendment denies tax deductions for the decline in value of ‘previously used’ or ‘second hand depreciating assets’ (plant and equipment) found within residential investment properties. The new legislation will limit plant and equipment depreciation deductions to only those outlays actually incurred by investors in residential properties and those who purchase brand new investment properties. “This change will have a major impact on investors, essentially reducing the annual deductions they can claim which in turn, reduces their cash return each year,” said Chief Executive Officer of BMT Tax Depreciation, Bradley Beer. “This could lead to investors being in a tighter financial position and may discourage investors from purchasing second hand residential properties in the future. “These amendments will cause a financial disadvantage for property investors. The vast majority of whom are typical mum and dads, police, nurses and teachers who own one investment property. We will be treating them differently to investors in other asset classes. “A transaction of a property between two parties will now extinguish the ability to claim legitimate deductions,” Mr Beer explained. From July 1 this year, the depreciation of acquired second hand or previously used plant and equipment assets will be reflected in the cost base for capital gains tax purposes. Existing investments will be grandfathered. Property owners who exchanged contracts to purchase their property before the 9th of May 2017 can continue to claim a deduction for depreciation on the plant and equipment items within the property until either the investor no longer owns the asset, or the asset reaches the end of its effective life. The Draft Bill went to public consultation in August which saw the public and key stakeholders voice concerns about the severity of the changes and the negative effect on housing affordability. There were also proposals outlining alternative options (put forward by industry stakeholders) which were designed to satisfy the integrity issue of claims being made in excess of an assets value without extinguishing a legitimate deduction for property investors. Notwithstanding the consultation process and suggestions from the public, industry and key stakeholders, the government continued with the proposed amendments outlined in the Draft Bill. “There are much simpler and fairer ways to address the integrity issue raised and BMT has put these options forward to Treasury,” said Mr Beer. Legislation now needs to be debated and passed by both houses of parliament before it becomes law. “We can only hope that the senate opposes this policy,” said Mr Beer. “Our data demonstrates that the average depreciation deduction claimed for plant and equipment assets on a typical three year old residential property, purchased for $600,000, is $21,178 for the first five years. “The changes will result in an average loss of $4,236 in deductions per year to property investors. Based on a marginal tax rate of 37 per cent, an increase of $47 per week in rental income would be required to counter balance this reduction. “The good news is that investors who purchase brand new properties or new plant and equipment assets for a residential investment property can continue to claim a depreciation deduction over the effective life of the asset. However, subsequent owners of a property will be unable to claim the deduction for depreciation of plant and equipment assets,” said Mr Beer. The capital works deduction, which makes up 85 to 90 per cent of the total depreciation claim for residential investors will not be affected. “Residential property investors will still be able to claim capital works deductions, also known as building write-off, including any additional capital works carried out by a previous owner,” said Mr Beer. “These changes make it as important as ever for property investors to utilise Quantity Surveyors to find and correctly claim, every single deduction they are entitled to,” said Mr Beer.

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New depreciation legislation for Australian property investors

Treasury Laws Amendment Bill to impact property investors