Depreciation Changes – 2017 Budget
Well, that caught everyone by surprise.
We are fielding plenty of calls from confused property investors. The waters are still a bit muddy, but here are a few points that might clarify some things:
1. This only applies to residential investment properties purchased after 7.30pm on May 9, 2017. ‘Purchase’ is generally defined as the date you put down a deposit on your investment property and contracts are signed and exchanged.
2. So if you already own your investment property, you are not affected. This is called ‘grandfathering’. It means changes are not retrospective.
3. The changes affect Plant and Equipment. A more common name for this stuff is Depreciating Assets: stoves, carpet, air con, curtains, and blinds etc.
4. If you buy a second-hand investment property, you will no longer be able to depreciate the stove, carpet etc.
5. The reason for this is simple. The government wants to stop the same items being depreciated over and over by consecutive property investors.
6. Depreciation on the building itself is not affected.
7. With a new investment property, you should still be able to depreciate the Assets because you are the first owner of them.
8. If you bought an investment property new, lived in it for a while and then moved out and turned it into a rental property, you should be able to depreciate the Assets because you are the first owner of them.
9. Commercial property is not affected.
The above is our interpretation of the changes on the 9th of May in the 2017 Budget and there are things yet to be confirmed. Given the uncertainty, if you are sitting on a property that needs a Depreciation Schedule, do it now. Call us on 1300 66 00 33.