ATO: “Any owners who purchase a second-hand residential investment property who have exchanged contracts after 7:30 pm on the 9th of May 2017 will not be able to claim tax depreciation on existing Plant and Equipment (Division 40).”
Well, have you renovated recently? If so, you may be the exception to the rule. Depending on the degree and type of renovations, you could still qualify for deductions. Any renovations classified as capital improvements (substantial renovation works) can be tax depreciated and claimed. Substantial renovations are those in which substantially all of a building is removed and replaced.
Structural additions, changes or upgrades e.g., demolition walls, installing new walls, lifting or modifying roofs, replacing windows and the likes.
Non-structural works to essential services e.g., replacing electrical wiring or plumbing, replacing the entire kitchen including the upgrade of plumbing works and the likes.
The renovations that do not qualify for deductions include upgrading individual rooms, additions that are undertaken with renovations, curtilage work associated with the renovations, and cosmetic/make-overs where the functionality of the item is maintained or repaired rather than improved or replaced.
If the renovations that you have undertaken on your second-hand investment property can be classified as substantial, as per the requirements above, you are eligible to claim assets from Division 40 (Plant and Equipment). If you are unsure about the circumstances of your renovation, give us a call on 02 9586 4401. We are here to answer all of your depreciation-related questions.