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WHAT PROPERTY INVESTORS NEED TO KNOW ABOUT DEPRECIATION CHANGES

Powered By Washington Brown

NEWS: The Australian Government has changed the rules regarding what depreciation claims property investors can make moving forward.

The official explanation is a little confusing and complicated.

And that’s why we decided to write this page, to explain in simple and straightforward terms how these changes affect property investors and your ability to make claims.

Here are the changes you need to know about…

In a nutshell, the proposed changes only relate to residential property. Commercial, industrial, retail and other non-residential properties are not affected in the slightest.

The building allowance [or claims on the structure of the building] has not changed at all. You will still need a Depreciation Schedule to calculate these deductions.

You CAN continue to claim depreciation on both building structure and assets if…

You purchased a brand new property after May 10th, 2017. You can carry on claiming depreciation exactly the way they have done so to date.
You engage a builder to build a house and it remains an investment property, you will still be able to claim depreciation on both the structure and the Plant and Equipment items.
You buy the property through a corporate tax entity, super fund or a large unit trust (note Self-Managed Super Funds do not apply here).
You renovate an investment property, you will still be able to claim depreciation on it when you have finished the renovations.

You CANNOT claim depreciation on plant and equipment if…

You purchased a second-hand residential property after May 10, 2017, which contains “previously used” depreciating assets. You will no longer be able to claim depreciation on those assets.
You purchased a residential property before May 10, 2017, but it was not income producing in the 2016/2017 financial year.
You renovate a house whilst living it in, then sell the property to an investor, the asset will be deemed to have been “previously used” and the new owner cannot claim depreciation.

The Good News: If You CANNOT claim depreciation you can STILL pay less Capital Gains Tax when you sell your property.

Although you can’t claim depreciation on plant and equipment when you purchase a second hand property, you are allowed to offset against Capital Gains Tax. The offset will be the amount of the unclaimed depreciation that you would’ve been able to claim in the past, you now simply claim that as capital loss when you sell the property or remove the item.

Here’s what you need to know about.

If you’re thinking about buying, selling or renovating an investment property, then here are a few options you could take to protect your investment while maximising your tax return.

If you own a residential apartment which you exchanged after May 10th, 2017, then congratulations, we more than likely have your depreciation report on file! Click here to find and order the depreciation report for you property
If you own a residential apartment, exchanged before May 10th, 2017, we can still help. You’re still eligible to claim depreciation on the plant and equipment within the property, so we recommend you take a look at our specifically designed packages that will maximise your deductions.
If own a house, we’re not likely to have been involved in its development, so an inspection will generally be required. Luckily you can still search your address and quickly see our best packages for your needs.
If you own a commercial property and want to find out what deductions you can claim, we recommend you contact the experts at Washington Brown for a free quote.
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