2017 Budget Changes for Property Investors
The 2017-18 Federal Budget proposes changes to depreciation for Property Investors.
It is important that we make clear that the following changes have been proposed but are not yet legislated. This means that there may be changes.
The information which we provide to you in this blog is current as at 22nd May 2017 but is subject to change.
What types of properties are affected?
Only ‘Second-Hand’ properties purchased after 9th May 2017 will be affected by the proposed changes. In simple terms, if you purchase a property that has already been owned or lived in by someone else, it’s classed as ‘second-hand’.
The budget notes were clear that existing investments will be grandfathered – therefore any properties you owned up to and including the 9th May 2017 are not impacted (regardless of if they are ‘new’ or ‘second-hand’.
If you are purchasing a brand new property as an investment, there are NO changes to the current tax deductions or depreciation of assets.
What is the change & When does it start?
It is expected that the legislation will commence 1 July 2017 (subject to being passed by parliament).
This means that anyone who has purchased a property up until the 9th of May 2017 will be able to claim depreciation as per normal.
The changes in the proposal specifically discuss Capital Works and Plant & Equipment.
Capital Works Depreciation
No change to legislation for new or second hand properties for owners before or after 9th May 2017.
Investors will still be able to claim qualifying capital works deductions, including any additional capital works carried out by themselves or a previous owner.
Plant & Equipment Depreciation
As per the current rules, Property Investors will be able to depreciate new plant and equipment assets within a new property and items they add to their property.
BUT, subsequent owners (taking ownership after 9th May) will not be able to claim depreciation on existing plant and equipment assets.
Therefore, if you have not paid for the Plant & Equipment, then you cannot claim tax deductions for these items.
Investing in Property
Property Asset Planning has always maintained that a New property is a superior investment over a ‘second-hand’ property.
Check out our Blog from December 2016: