Tax Q&A: Questions on Unclaimed Depreciation on Property, Answered.
Q: I own a three-bedroom townhouse that I bought three years ago for $434,000.
I never bothered getting a depreciation schedule as the place was 17 years old, and I was always under the impression that depreciation was only for new homes. However, I recently read in this magazine that older homes can attract good depreciation benefi ts as well.
What kind of depreciation schedule would I be able to get on this type of property, and can I go back and make claims on my previous tax returns? It’s a two-storey townhouse, with three bedrooms, and there is airconditioning in the main areas and living room, with a pool in the complex.
Thanks, Drew.
A: Property tax depreciation allowances or ‘capital allowances’ are calculated based upon two different sections of income tax legislation and consider two different aspects of your asset. The two main areas to property tax deductions are: Plant & Equipment; and the Capital Works deductions.
Plant & Equipment (also known as Division 40) are items that are usually fixtures and fi ttings, which can be easily removed from the property, as opposed to items that are permanently fixed to the structure of the building.
Plant and equipment items include, but are not limited to: hot water systems, carpets, blinds, ovens, cooktops, range hoods, freestanding furniture, air-conditioning systems, BBQs, heaters and flooring (floating floor boards).
“If you have not claimed depreciation on your property in the past, it is possible to amend previous tax returns – to a point” Continue reading
Budget 2017 Depreciation Deductions
In the Federal Budget on 9th May, depreciation allowances forming part of an investors income tax deductions for second hand residential investment properties were effectively killed off.
This will apply to the purchase of any second hand properties where the contract to buy is entered into after 7.30pm on 9th May 2017.
Contracts entered into prior to this date will be grandfathered and deductions will still be able to be claimed.
What this means is not entirely clear yet.
Will this mean, for example, that items previously considered to be plant and equipment and therefore deductible under Division 40 of the ITAA could now simply form part of the building and therefore become deductible as part of the building and included under Division 43 Capital Works deductions? Continue reading
