In what has been described as one of the most dramatic changes to property depreciation legislation in over 15 years, Parliament has passed a new ‘Housing Tax Integrity’ Bill, which has now been legislated.
Under the new laws, investors of second-hand properties will be disadvantaged compared to investors of new properties, with new restrictions on property depreciation claims.
Owners of second-hand residential properties bought this year (where contracts exchanged after 7:30pm on the 9th of May 2017) will not be able to claim depreciation on plant and equipment assets, such as air conditioning units, solar panels or carpet.
The ABS reports that in Australia, the vast majority of investors (97%) buy second-hand property – so the new depreciation legislation will affect many.
The 3% of investors who purchase brand new residential properties are unaffected by the new laws, with a few key points to note:
- When purchasing a new dwelling from a property developer who has already found a tenant for the property, investors can only claim plant and equipment depreciation if they acquire the property from the developer within 6 months of the construction completion date.
- Investors who live in a property that was purchased brand new, and then decide to lease the property out (after 7:30pm on 9 May 2017) will not be entitled to claim plant and equipment deductions as the assets are considered “previously used.”
- Any additional assets acquired after settlement can be depreciated as normal as long as the assets have not been previously used.
“This is extremely positive news for all investors who have purchased new residential property and intend to hold onto it for the long term. It represents a key benefit for buying new property over old,” said Ironfish Director, Property Acquisition & Research, Grant Ryan.
“This new legislation supports our Portfolio Approach strategy targeting new property,” he said.
According to tax depreciation specialist firm, BMT, there are still thousands of dollars to be claimed by Australian property investors. However, “it is more important now than ever to talk to a specialist Quantity Surveyor to ensure all deductions are maximised,” the company states.
For more details on the new changes see the video below:
If you would like to take advantage of the new legislation and want further information on investing in new property in Sydney, Melbourne, Brisbane, Adelaide or Perth, please book an appointment with your local Strategist.