Depreciation Changes

All investors and property owners will be impacted by the May 2017 budget changes which end depreciation deductions (but not capital allowance deductions) for some investors and property owners.

Merely having a quantity survey report is no longer an entitlement to a full deduction. The new rules don’t just affect those who buy a property after the budget announcement. It affects all property owners to a degree.

Where property use was for investment purposes prior to the budget, and remains so, the changes won’t impact until the property use changes. But that isn’t quite so simple. Many will be affected including:

  • Those who stay in their property even for one night. This will taint the depreciation deduction, ending it. Capital allowances remain deductible.
  • Those who move into a property first and then later commence to rent it. Depreciation may end for this private use even if no income is generated.

The new rules are intended to stop new owners claiming depreciation on articles which were used by someone prior to you buying. So if you buy new carpet and appliances we can include the depreciation for these items.

The new rules also come with a benefit. Items scrapped during ownership and also items no longer eligible for depreciation will revert and access a new benefit. A new (capital gains tax) CGT loss can be claimed. But those without a Quantity Survey report may miss that benefit. So our tip may be to find out if a Quantity Survey report could identify that benefit.

We are being asked by many investors – Should I still bother about a Quantity Surveyor report? Our answer is YES. We recommend all investors discuss their personal situation with a Quantity Survey expert who can estimate the new benefits you can access. Whether it’s a deduction or a CGT loss benefit or just simple capital allowances over a long term it varies in each instance. These will vary for the owners and the specific property. The fact is, Div 43 Capital Allowance remain a long term tax deduction and nothing has changed. Call us and we will be happy to refer you to one of our three preferred experts. And they will guide you for no cost so your decision to obtain a Quantity Survey report based on expert advice.

Of course, if you seek guidance on this or any other property tax issue we are happy to assist. Call our advisers today.

Paul Gerrard – Accounting & Tax Manager