Chan & Naylor | depreciation

Property depreciation changes are now legislated

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The Parliament has passed one of the most dramatic changes to property depreciation legislation on 15 November 2017. The Treasury Laws Amendment or Housing Tax Integrity Bill 2017 has now been legislated.

Australian property investors still have thousands of dollars to claim so it is important to talk to your accountant and make sure you claim every deduction available to you.

Since 1st of July 2017, plant and equipment depreciation deductions are limited to only those outlays actually incurred by residential property investors. The acquisition of existing plant and equipment assets, on the other hand, will be included in the cost base for CGT purposes.

Investors who purchased their properties before 9th of May 2017 may claim depreciation deductions until they no longer own the asset or the asset reaches its end of life.

Investors who buy new assets even after 9th of May 2017 may still claim a deduction over the effective life of the asset but subsequent owners will no longer be able to, unless the asset is considered trading stock wherein owners can claim depreciation on all assets they add to the property.

Subsequent owners are still entitled to claim qualifying capital works deductions based on the property structure and assets permanently fixed to the building. These deductions often make up about 85 to 90% of the total claimable amount.

Capital works deductions are claimed for the wear and tear of the building structure, including any structural improvements which have been made during a renovation.

Properties which have been lived in and turned into an investment property before 1st of July 2017 are still eligible to claim plant and equipment depreciation and capital works deductions. However, while owners who rented out their properties only after 1st of July 2017 may still claim capital works deductions, they may no longer be able to claim plant and equipment depreciation.

If a property is substantially renovated for selling purposes, the investor may claim depreciation on the new plant and equipment assets. Note that cosmetic changes are not considered substantial as substantial renovations only occur when a building is removed, replaced or affected as a whole.

All previously used plant and equipment will be excluded from the depreciation schedule and included in a capital loss depreciation schedule for the purposes of claiming a capital loss. This will allow the owner to adjust their CGT liabilities.

What can you do?

If you would like to know more about depreciation deductions, you can click here to know more about Chan & Naylor services. You can leave your details here and we can schedule you for a free consultation. We’ll contact you to explain more.

Whether you are a beginner, seasoned investor or business owner, we can give you guidance to maximise the financial areas of your life. We can give you an integrated and tailored solution of your superannuation, taxation, property investment, asset protection, estate planning and more.

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Chan & Naylor Group has nationwide offices in Brisbane and Capalaba in Queensland, Melbourne and Moonee Ponds in Victoria, East Perth in Western Australia, and South West Sydney, Parramatta, Pymble, North Sydney, and Sydney in New South Wales.

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