In a recent article, we explored capital works deductions. The other category that makes up depreciation is plant and equipment, or division 40.
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 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. Some examples include the carpets, blinds, air conditioners, hot water systems, smoke alarms and ceiling fans.
Each of the assets is assigned an individual effective life and depreciation rate by which depreciation should be calculated. The depreciation rates and effective lives of all ATO specified plant and equipment assets differ by asset and even by industry. The ATO recognises that plant and equipment items will wear out more quickly than the building itself and likely need replacing sooner.
Changes to depreciation rules in 2017
On Wednesday the 15th of 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.
The changes mean that owners of second-hand residential properties (where contracts exchanged after 7:30pm on the 9th of May 2017) are no longer eligible to 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, which typically make up between 85 to 90 per cent of an investor’s total claimable amount.
Previously existing depreciation legislation has been grandfathered, meaning investors who already made a purchase prior to this date can continue to claim depreciation deductions as per before.
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.
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 further information on any property investment scenario, speak with one of the expert staff at BMT Tax Depreciation on 1300 728 726.