2017 Budget – Changes to Residential Investment Properties Depreciation

Well, that caught everyone by surprise and the waters are still a bit muddy. The information released when a Budget is handed down is often pretty broad – it’s a bit of a blunt instrument.

What roughly happens then is that it is translated into legislation. That can take 3-4 weeks.

In the meantime, here are a few points that might clarify some things for your clients:

1. The changes only apply to residential investment properties purchased after 7.30pm on May 9, 2017. ‘Purchase’ is generally defined as the date you put down a deposit on your investment property and contracts are signed and exchanged.

 

2. So if you already own your investment property, you are not affected. This is called ‘grandfathering’. It means changes are not retrospective.

 

3. The changes affect Plant and Equipment. A more common name for this stuff is Depreciating Assets: stoves, carpet, air con, curtains, and blinds etc.

 

4. If you buy a second-hand investment property, you will no longer be able to depreciate the stove, carpet etc.

 

5. The reason for this is simple. The government wants to stop the same items being depreciated over and over by consecutive property investors.

 

6. Depreciation on the building itself is not affected.

 

7. With a new investment property, you should still be able to depreciate the Assets because you are the first owner of them. This is one of things that will take some weeks to confirm.

 

8. It follows that if you bought an investment property new, lived in it for a while and then moved out and turned it into a rental property, you should be able to depreciate the Assets because you are the first owner of them.

 

9. Commercial property is not affected.

 

The above is our interpretation of the changes on the 9th of May in the 2017 Budget and there are things yet to be confirmed.

 

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REF: our friends @ Depreciator