• By Chris Podmore
  • Dec 13, 2017

There have been a few changes to the Tax Depreciation laws this year which we would like to recap for those that are owners of an investment property or looking to buy an investment property in the future.

WHAT WE KNEW PREVIOUSLY:

-          If you purchased the asset or the rental property with the assets in it before 10 May 2017 you can claim Division 40 depreciation.

-          If you purchased a newly built property, you can claim Division 40 depreciation.

-          If you purchase an existing property where the assets are classified as being previously depreciable, you cannot claim Division 40 depreciation.

 

NEW LAWS HAVE PASSED, FURTHER CLARIFICATION HAS BEEN GIVEN:

-          Firstly, If you bought the property or the assets before 10 May 2017 BUT in the 2016/17 year (normally 1 July 2016 to 20 June 2017) you did not use the property or the asset as or in a rental property, you cannot claim tax depreciation.

-          Secondly, a depreciable asset will be considered previously used if any of the following three situations apply;

 

o   First, the taxpayer is not the first entity that used the asset other than as trading stock. Retailers and developers will sell new depreciable assets as trading stock so deductions will be available for these assets. For retailers the owner will have purchased the depreciable asset directly so will not be able to use an estimate as the cost of the good.

o   Second, the asset is used or installed ready for use in the residence of the taxpayer for any time. Once a taxpayer has installed a depreciable asset in their residence they can never depreciate it ever again.

o   Third, the asset is used or installed ready for use for a purpose that is not a taxable purpose, other than incidental or occasional use. This will mean a taxpayer staying at their rental property at the beach will mean no more depreciation deductions ever again on the assets in the beach house, even if it is rented out later. However, this will not occur if the private use of the beach house is merely incidental or occasional.


-          The last thing to remember regarding buying new residential premises, you can still lose the depreciation deductions on assets if you do either of the following:


o   Make the residential premises your residence for any time; or

o   Use the residential premises for a purpose that is not a taxable purpose, other than incidental or occasional use. 

about the author

Chris Podmore

Tax and Asset Management Team Member- QLD

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