Rental Property Depreciation – Major Changes in Australia in 2017

In 2017, Australian property investors were subject to significant changes to property depreciation laws, with the government implementing changes to the Housing Tax Integrity bill.

The government has now legislated limits on landlords plant and equipment depreciation deductions to outlays actually incurred.

Under legislation passed into law last year, income tax deductions for the decline in value of previously used plant and equipment in rental premises used for residential accommodation are no longer available. The changes apply from 01 July 2017 to:

  • Previously used plant and equipment acquired after 09 May 2017 unless it was acquired under a contract entered into before this time.
  • Plant and equipment acquired before 01 July 2017 but not used to earn income in either the current or previous year.

There are two types of allowances available for investment properties – depreciation on plant and equipment and depreciation on building allowance. Building allowance deductions remain unchanged going forward.

Generally, rental property owners can only claim depreciation on any new item actually purchased under the new rules.

The changes do not affect deductions that arise in the course of carrying on a business, or for:

  • Corporate tax entities
  • Superannuation plans other than self-managed superannuation funds
  • Public unit trusts
  • Managed investment trusts
  • Unit trust or partnerships whose members are above listed entities

This measure is a government attempt to reduce pressure on housing affordability. The Labor Party are still saying this is not enough!, Labor has indicated they will take to the next election a policy of denying negative gearing. In other words they don’t want you to claim any rental losses against other income you earn.

Included here is very helpful video courtesy of BMT Quatinty Surveyors which provides an excellent overview of these changes.

If you are a property investor, or looking to get into property investment, and want to know more about the recent changes, contact Catalyst Accountants and speak to a professional to find out how you may be impacted. Another article that may be of interest to you is our recent advice piece is ‘How an Accountant would advise their own child to enter the Property Market in 2017‘.