New Depreciation Legislation Passed by the Parliament

On November 15 2017, The Treasury Laws Amendment Bill was passed through Parliament, prohibiting owners of second-hand properties to claim depreciation on certain assets. It was announced in the May 2017 Federal Budget.

What does this mean for investors?

The details of the amendment is stipulated in the bill, which states that property owners will no longer be eligible to claim plant and equipment assets such as carpets, solar panels and air-conditioning units in second-hand properties purchased after 7:30 pm on the 9th of May 2017.

This is to affect property owners with losses averaging around $4236 annually in deductions related to depreciation within the first five years of owning the property. These deductions cover between 85% and 90% of their total claimable amount.

The deductions will be divided into two components: plant and equipment, and capital works allowance. The new rules, however, do not include capital works deductions for a property’s structural component or any of its fixed items like retaining walls, basins and doors. It will make up around 80 to 90 percent of the total claimable amount. So let’s say you purchased a $600,000 property that is four years old. Expect to claim around $6,126 in capital works deduction in the first full financial year.

This new amendment only applies to second-hand residential properties purchased after 7:30 pm on the 9th of May 2017. Investors who purchased their second-hand residential properties prior to this date can carry on claiming their depreciation deductions just as they did before. The same applies with investors who purchased brand new residential and commercial properties.