Rental properties and the new depreciation rules

One of the most notable changes announced in the May 2017 budget has impacted the way in which investors are able to claim deductions on plant and equipment for residential properties.

From 1 July, 2017 property investors are denied from claiming income tax deductions for the decline in value of ‘previously used’ plant and equipment within residential investment properties. In essence, unless the investor has physically purchased the plant and equipment items they can no longer claim depreciation on them. Investors are still able to claim income tax deductions for qualifying capital works (Division 43) which typically makes up between 85 to 90 per cent of the total claimable amount.

Thankfully, existing property investments will be grandfathered – meaning that the investor can continue to claim depreciation on plant and equipment on any property purchased prior to 7:30pm on the 9th May 2017.

The only real investor losing out from this legislative change are subsequent owners (those who purchase a second-hand residential investment property) who have exchanged contracts after 7:30pm on the 9th May 2017.  Owners of brand new residential properties, investors who exchanged contracts prior to the above date and owners of non-residential/commercial properties will not be affected by this change.

So how can I claim depreciation after 1 July, 2017?

Basically there are three ways in which you can claim for depreciation on plant and equipment after the legislated changes:

  • You purchase a brand new residential property
  • You add the plant & equipment item directly yourself
  • You have been previously claiming depreciation on properties purchased prior to the 9th May 2017

The government’s intention in making this amendment was to deliver an ‘integrity measure to address concerns that some plant and equipment items were being depreciated by successive investors in excess of their actual value’.

If you have any concerns with the above changes, or just want to know more please do not hesitate to contact our office to speak with one of our investment property experts.

To learn more or to see how this change might affect you, you can also visit