On the 9th May 2017 the federal budget announced some substantial new rules relating to Tax Depreciation. These rule changes were effective immediately and affect property investors who purchase second hand residential investment properties.

From 7.30pm on 9 May 2017, any investor who purchases a second hand residential investment property will no longer be able to claim depreciation deductions on plant & equipment items. These items are those typically found inside an investment property such as carpets, window blinds, whitegoods & hot water systems, etc. The new rules state that you will only be able to depreciate these items if you personally purchase and install them after you have settled on the property.

The Capital Works deduction, which is the depreciation relating to the actual historical construction cost of the property remains UNCHANGED and is still available on all properties as long as the property was originally built after 16 September 1987. Any improvements made to the property, by either yourself or a previous owner, are also depreciable and are able to be claimed as per normal (new painting, renovation of kitchens & bathrooms, etc),

This makes getting a Tax Depreciation Report even more critical for second hand properties to ensure that every last bit of depreciation is correctly claimed in an effort to reduce your taxable income.

For all new residential investment properties, where you are the first owner of the property, the rules have NOT changed in any way and these properties remain fully depreciable as per normal.

Commercial properties are not affected by the new rules and can be depreciated irrespective of whether they are new or existing.

If you would like further information about these changes, feel free to call the friendly team at Summit Quantity Surveyors and we will be happy to discuss this with you.

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