New depreciation rules on residential property!

Updated: May 6, 2019



In the 2017 Federal Budget there was a proposal to change the deductions available for second-hand depreciating assets, these proposed changes were passed by the Senate in November 2017.


The previous deprecation legislation has been grandfather for properties purchased prior to 7.30 pm on the 9th May 2017. Any contracts entered into prior to this date can continue to claim depreciation on second-hand assets as per before.


For contracts entered into after 7.30pm on the 9th of May 2017 property investors will no longer be able to claim depreciation deductions on second-hand depreciating assets (division 40). However, investors that purchase a new property can continue to claim a depreciation for plant and equipment. Similarly, depreciation can be claimed on eligible new assets regardless of when the property was purchased.


Depreciation deductions can’t be claimed on items installed on or after 1 July 2017 if they have been used for private purposes. Properties which have been lived in and converted into an investment property by their owners after 1 July 2017 are not entitled to a deduction (for example, depreciating assets in a property that was your home in 2016/17 that you converted into your rental property in 2017/18)


It is important to note, the changes to legislation do not affect an investor’s ability to claim the capital works component (deductions available for the wear and tear of the building structure and fixed items, division 43). Generally, the capital works deduction is the largest category.


Melbourne Tax Advisory