Due to legislation changes in 2017, plant & equipment (division 40 – e.g. lights, blinds, appliances, flooring) can no longer be claimed in every scenario. Essentially, second-hand plant & equipment can no longer be claimed for residential tax depreciation. Some of the following scenarios describe where division 40 cannot be claimed:
- Purchasing a second-hand property and not installing any new plant & equipment in it.
- Purchasing a brand new property and living in it (for any amount of time) before renting it out.
- Installing new items in your property while living in it before renting it out.
There is an exemption for companies that can still claim division 40 in any of these circumstances.
If you purchased a second-hand property to rent out and install new plant & equipment, such as carpet or new appliances, then only those new items will be claimable for tax depreciation. The old items will be excluded from the depreciation report.
In such cases where division 40 cannot be claimed, you still may be eligible to claim division 43 (capital works) and so it still may be worthwhile obtaining a Thrifty Tax depreciation schedule. If you receive a report where no division 40 can be claimed, your report will include a capital works schedule instead of a diminishing value or prime cost schedule.