Source: BMT Quantity Surveyors
Property investors in second-hand properties need be aware of the recent most drastic changes to Australian depreciation legislation in 15 years. Brand new residential and substantially renovated second-hand property owners and commercial property owners and tenants remain unaffected.
The new depreciation legislation affects only second-hand properties purchased after 7.30pm on 9 May 2017.
New owners of this category of property will not be able to claim depreciation on existing plant and equipment assets. These are removable and mechanical assets such as blinds, curtains, smoke alarms, air conditioners, solar panels, fans, dishwashers and water heaters. However, they can claim on any new additions they make to plant and equipment assets.
Capital works deductions which usually equates to 85-90% of the total construction cost and remain unaffected. Deductions can be claimed for wear and tear to the structure of a property. This includes any structural improvements that have been made during a renovation. Generally, any residential building where construction commenced after 15 September 1987 will entitle its owner to capital works deductions at a rate of 2.5 per cent for up to forty years. Included in this category are building structure and items such as fences, walls, doors, windows, cabinets, baths, toilets and sinks.
The table below shows the deductions an investor would receive for both a three year old and a ten year old residential property purchased for $600,000.
