There are several property-related tax deductions that investors claim, including Council and water rates, property management fees and repairs. But there’s one big deduction that most property owners don’t even know about: depreciation. It’s also often the largest claimable tax deduction for rental properties.
However, the Federal Government’s 2017/18 Budget has made changes to depreciation rules that may affect what you can claim. Keep reading to find out how.
What are the depreciation changes in the 2017/18 Budget?
Firstly, if you purchased an investment property before the 2017/18 Budget announcement, you won’t be affected. The changes only apply to residential investment properties purchased after 7:30 pm on 9 May 2017. ‘Purchase’ is generally defined as the date you put down a deposit on your investment property and contracts are signed and exchanged.
The depreciation changes affect fixed or tangible assets, also known as ‘plant and equipment’. A more common name for this is depreciating assets which include stoves, carpets, air conditioning units, curtains, and blinds.
If you buy a second-hand investment property, you’ll no longer be eligible to claim depreciating assets. This is because the Federal Government wants to prevent the same items being depreciated over and over by consecutive property investors. If you purchased a new home, you may still claim depreciation – even if you moved out and starting renting the property.
Building depreciation and commercial property are not affected.
While there are still things to be confirmed by the government, we think it makes sense to take advantage of the current allowances for depreciation before the 2017 financial year ends. There are many companies that offer tax and depreciation schedules – including one that we use called Depreciator – that you should include in your personal and company tax returns. These services are usually 100% tax-deductible, so it’s worth taking the time to find out exactly how much you may claim.