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 →

Q:  I am looking at buying my first investment property this year, and a friend has advised me to purchase a unit instead of a house for better depreciation benefits. I don’t quite understand how this works: houses are bigger, therefore shouldn’t the depreciation returns be higher? I would love some advice before I invest, as I’m aiming to keep my cash flow position as strong as possible (ideally I want a neutral or positively geared investment).

Thanks, Dale

A:  Residential investment properties are usually classified into four main types of building: residential houses, townhouses, apartments or units (low-rise and/or high-rise). All these do allow you to obtain different types of capital allowance deductions.

If you are claiming under Division 40 on the above brand-new properties, you are generally entitled to claim the following percentages of the construction costs as a capital allowance:

a. Residential houses: 5–10%
b. Townhouses: 5–15%
c. Units/apartments, low-rise: 5–15%
d. Units/apartments, high-rise: 10–20% Continue reading →