ATO depreciation legislation changes

With a major legislation change implemented recently, Duo Tax Quantity Surveyors reflects on the impact it has had on the Australian property investors. In summary, most investors we come across have no idea about the change until they are advised to seek advice from a quantity surveyor who specialises in property tax depreciation. The change can result in a loss of up to $50,000 worth of tax deductions if they are not aware of the eligibility criteria. Making it more crucial than ever to have a quantity surveyor determine the feasibility of depreciation on any rental property.

Well before the recent legislation changes to depreciation on rental properties, most would already question the feasibility of obtaining a tax depreciation schedule. The problem is only worse with the evermore stringent rulings. The legislation effectively prevented property investors from claiming depreciation if you purchased or exchanged contract after the Budget night. The Federal Budget night took place at 7:30 pm on the 9th of May 2017 and outlines proposals to amend legislation.

It’s worthwhile noting that legislation changes only affect Plant and Equipment. This is Division 40 of the Income Tax Assessment Act and has no bearing on claims of Capital Works or Building Allowance depreciation.

Now with the recent changes, it becomes even more difficult to adequately ascertain if a depreciation schedule is a viable option for you.

Legislation changes affecting Depreciation in a nutshell

To give you a quick rundown of the legislation changes, we have listed below the key changes to identify ineligibility.

Depreciation on the fixtures and fitting you can no longer claim if:

  • You purchase this property second-hand (not brand new)
  • You purchase this property after the 9th of May 2017
  • You made this purchase prior to 9th of May 2017, however not made available for rent in 16-17 Financial Year

Under what circumstances would I qualify for depreciation?

Here are a few examples:

  • You purchased the property well before 9th of May 2017 and made available for rent since the acquisition date
  • You purchased the property either before or after Budget night and it is built after 17th September 1987
  • You purchased the property after Budget night; however, it is built prior to the cut-off date of 17/09/1987 but major renovations have been undertaken by you or the properties previous owners
  • The property you purchased is not owned by individuals or a Self-Managed Superannuation fund but another entity i.e. company
  • The property you purchased operates as a commercial property and will be eligible for depreciation regardless if new or second-hand

Under what circumstances would I be disqualified for depreciation?

Here are a few examples:

  • You purchased the property well before Budget night. However, between 1/7/16 and 30/6/17 you made no attempt to rent it out
  • You purchased the property well before Budget night. You may have had it for rent however it became your main place of residence. Thereafter when switching it back to investment, you will disqualify yourself from claiming depreciation on fixtures and fittings (however may still claim capital works also known as building depreciation)
  • You purchased the property after Budget night and the building is built well before 1987 (no capital works deductions)
  • You purchased the property after Budget night and there are no notable renovations or improvements

The above cases are difficult to identify if you do not have the right research and real-estate tools to identify. That is why Duo Tax Quantity Surveyors can provide a free consultation to give you hard facts about your property’s build date, purchase date and even look up renovations. Relying on these facts along with online database photos of your property, we can provide guaranteed deductions prior to commencing any work. This gives every client of ours tax-deduction guarantees before the job starts. Resulting in 100% client confidence in our advice.

There is much complexity that revolves around tax depreciation and these new changes. The soundest advice we can offer all property investors is to ask a Quantity Surveyor the question:

This is my investment property’s address and what is my entitlement as a taxpayer?

Tuan Duong is the Director of Duo Tax Quantity Surveyors. One key vision of the business is to ensure all property investors are well equipped with the right tools and knowledge about property tax depreciation.

With a multitude of property types in Australia, Tuan’s team are able to prepare tax depreciation schedules for properties as small as a granny flat or office suites to large scale multi-storey developments. The pivotal success of Duo Tax stems from an ability to provide a personalised touch to what is a very streamlined engagement process.

For further assistance, email Tuan Duong on:

** General Advice Warning

The information provided on this website is general in nature only and it does not take into account your personal needs or circumstances into consideration. Before acting on any advice, you should consider whether the information is appropriate to your needs and where appropriate, seek professional advice in relation to legal, financial, taxation, mortgage or other advice.

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