Released on Federal Government’s Budget night in 2017, it is an integrity measure to address concerns that successive investors are depreciating some plant and equipment items above their actual value.
The Federal Government legislated new laws that affect claims to plant and equipment depreciation (see Division 40), which came into effect on the 9th of May 2017. It affects property investors who purchase residential property as individuals (Companies and managed funds are unaffected). It also affects property investors who switch their primary residence (PPOR) to an investment property after the 30th of June 2017.
Secondhand 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.
- Purchasing a brand new property and living in it (for any 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.
The legislation only affects plant and equipment, meaning that all residential properties may still claim building depreciation, otherwise known as capital works. Please refer to Thrifty Address Check Form. This is great news for property investors because they can still claim depreciation.