Tax Q&A: Inheritance of Existing Investment Property
Q: I have a question related to depreciation. I bought a new apartment in July 2016 and lived in it for 13 months. I started to rent the apartment from the end of October 2017. My question is, following the change to depreciation rules, am I able to claim depreciation for plant and equipment (dishwasher, fridge, etc)?
The property was brand new when I bought it, so I’m hoping depreciation benefits will still be available. I also have a query regarding depreciation and inheritance. If a married couple have an investment property and they are claiming plant and equipment depreciation, and then one spouse dies, can the surviving spouse (who inherited the existing investment property) continue to claim the plant and equipment depreciation?
Many thanks, Sam
A: With regard to your first question, unfortunately you won’t be able to claim depreciation on existing plant and equipment assets due to the recent change in the depreciation legislation in May 2017.
These changes affect second-hand investment properties that were purchased and/or rented after 1 July 2017, as in your case. In these situations, plant and equipment assets are considered pre-existing and previously used.
The depreciation on your plant and equipment assets began when you purchased your property.
But they only became depreciable against your income when you started to rent out the property after 1 July 2017. You can claim plant and equipment items such as a new dishwasher, fridge, etc., if you bought these new and installed them in your second-hand property.
“You won’t be able to claim depreciation on existing plant and equipment assets due to the recent change in the depreciation legislation” Continue reading
Govt curbs property tax deductions
THE federal parliament has passed legislation to limit tax and depreciation deductions claimed by residential property investors along with a vacancy tax for foreign owners who leave homes unoccupied.
Treasurer Scott Morrison and Assistant Minister Michael Sukkar said the reforms will help address housing affordability and assist private renters.
The Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 will disallow certain deductions relating to residential investment properties.
Morrison said the changes disallow claims for travel expense deductions and limit plant and equipment depreciation deductions to assets not previously used.
Depreciation will only apply where the depreciating asset was acquired new – this reform is expected to raise $260 million over forward estimates.
The Treasurer said limiting plant and equipment depreciation deductions will remove the existing opportunities for items to be depreciated by multiple owners in excess of their actual value.
For second hand residential properties purchased after May 9, investor will only be able to claim depreciation for plant and equipment assets where the depreciating asset was acquired new for that purpose. Continue reading
