On the 9th May 2017 at 7.30 pm tax depreciation changed. Contracts of sale exchanged after this date fall under the new rules.
New Tax Rules
Tax depreciation on pre-owned items (such as cooking equipment, heating and cooling) became a delayed benefit for investors. The used items of plant and equipment can still be claimed, but not until the time that the asset is disposed of. The unclaimed value of these assets are then claimed as a capital loss and added to the cost base of the asset.
So, these items are still beneficial to the investor, but the benefit is delayed until sale of the property.
The new rules do not change the way capital works is claimed. The original construction and any subsequent renovations or structural improvements are still claimed as before.
A quirk of the new rule is that any property purchased prior to this date, but not used for income producing purposes, in the 2016/2017 year, also falls under the new legislation.
For example, you purchase a property in 2015 but do not make it available for rent until 1/7/2017. Even though the property was purchased prior to the date of change in May 2017, it still falls under the new tax law as it was only made available for rent after the tax year 2016/2017.
These new tax rules do not affect newly constructed residential properties, nor does the depreciation allowable on commercial properties change.
The new legislation does not apply if:
Purchasing a brand new residential property
The property is a commercial property
Property is purchased in a company, or corporate tax entity
Properties have been substantially renovated by the previous owner
Residential properties held in a property trust (not SMSF)
Your primary place of residence is turned into a rental property. However, it must be prior to 1/7/2017 otherwise the new tax rules apply
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