The rules regarding depreciation deductions for rental properties used solely for residential properties have evolved. These changes primarily affect plant and equipment deductions.
Plant and Equipment
Plant and equipment items are usually mechanical fixtures or items that can be removed from a property, such as dishwashers and ceiling fans. This should not be confused with capital works, which relates to the structural elements of a building. A simple way to differentiate is to imagine turning the property upside down and shaking it vigorously—anything that falls out is generally considered plant and equipment.
Under the current legislation, depreciation deductions for these items are only allowed if they are new. Those who buy or install previously used plant and equipment for their residential rental properties on or after 7:30 pm on 9 May 2017, cannot claim deductions for these assets' decline in value1.
Clients who purchase new plant and equipment for their residential rental property at any time can claim a deduction over the effective life of the asset. However, subsequent owners of a rental property cannot claim deductions for plant and equipment purchased by a previous owner of that property1.
Depreciation Deduction Eligibility
The table below illustrates whether you can claim depreciation deductions under the current legislation if the property and depreciating assets were acquired in the period mentioned:
Date of Purchase |
New Assets |
Second-hand/Used Assets |
Example |
A property was purchased before 7:30 pm on 9 May 2017 |
Yes |
Yes |
You can continue claiming the depreciation as per your depreciation schedule if you bought the property before 7:30 pm on 9 May 2017 |
The depreciating asset was purchased before 7:30 pm on 9 May 2017 |
Yes |
Yes |
Irrespective of when you bought the property, if the depreciating asset was bought before 7:30 pm on 9 May 2017, then it is okay to claim it as an income tax deduction |
A property was purchased at or after 7:30 pm on 9 May 2017 |
Yes |
No |
|
The depreciating asset was purchased at or after 7:30 pm on 9 May 2017 |
Yes |
No |
Immediate Deductions
However, you can claim an immediate deduction if the value of the asset is less than $300.
Disclaimer: The material and contents provided in this blog are general guide and informative in nature only. They are not intended to be seen as legal and tax advice. If expert assistance is required, you should seek your own advice for any legal, tax or investment issues raised in your affairs.