These changes affect investors who purchase second-hand residential properties after 7:30pm on the 9th of May 2017 by limiting the depreciation they can claim on existing plant and equipment assets.
From the 1st of July 2017, plant and equipment depreciation deductions are limited to only those outlays actually incurred by residential property investors. The acquisition of existing plant and equipment assets may be reflected in the cost base for Capital Gains Tax (CGT) purposes for subsequent investors. Existing property investments are grandfathered. This means investors can continue to claim depreciation for plant and equipment assets that form part of a residential investment property purchased prior to 7:30pm on the 9th of May 2017 (including contracts already entered into at 7:30pm AEST on the 9th of May 2017).
Investors who fall into this category can continue to claim depreciation deductions until they either no longer own the asset, or until the asset reaches the end of its effective life. Investors who purchase new plant and equipment assets for a residential investment
property after 7:30pm on the 9th of May 2017 will be able to claim a deduction over the effective life of the asset. However, subsequent owners of a property will be unable to claim deductions for plant and equipment assets purchased by a previous
owner of that property.
Investors will still be able to claim qualifying capital works deductions (division 43) which are the deductions available on the structure of the building and assets considered to be permanently fixed to the building. This includes any capital works carried out by themselves or a previous owner.