Business advice
and accounting

Our purpose is to help you on your journey as you grow. Learn more about our history, partners and purpose.

Our purpose is to help you on your journey as you grow. Learn more about our history, partners and purpose.

Your partners for Business Service and Advisory, Taxation, Audit, Business Valuation, Forensic Accounting and Business Valuation Services.

Whatever your business, industry or family office, from local or international institutions we bring extensive expertise.

We're one team with a purpose and passion for what we do. Learn about our culture and career opportunities available to you.

Uncovering insights, trends and inspiration to help business grow in an ever-changing world.

We are always looking for ways to engage and give back to our community.

Telephone: +612 9283 1666
Email: admin@esvgroup.com

Level 13, 68 York Street,
Sydney NSW 2000

Why us

Our purpose is to help you on your journey as you grow. Learn more about our history, partners and purpose.

What we do

Your partners for Business Service and Advisory, Taxation, Audit, Business Valuation, Forensic Accounting and Business Valuation Services.

Who do we help

Whatever your business, industry or family office, from local or international institutions we bring extensive expertise.

Work with us

We're one team with a purpose and passion for what we do. Learn about our culture and career opportunities available to you.

What we think

Uncovering insights, trends and inspiration to help business grow in an ever-changing world.

Working to give back

We are always looking for ways to engage and give back to our community.

Contact us

Telephone: +612 9283 1666
Email: admin@esvgroup.com

Level 13, 68 York Street,
Sydney NSW 2000

Update on Depreciation for Investment Properties

24 October 2017

by Tim Valtwies

As part of the Federal Budget in May this year, the Government announced major changes to the operation of the depreciation regime, specifically in relation to residential property investors. The announced changes limit the depreciation deductions on “plant and equipment”, being any equipment that can be easily removed from the structure of a building, to items that have been paid for by the investor, not items of plant and equipment that are included as part of the acquisition of the property.

With legislation now in Parliament to give effect to these announcements, there is more certainty as to the impact and scope of the changes.

Summary of change

As currently before parliament, the law is as follows:

  • The restrictions apply to residential rental properties only. All other types of property will continue to be able to claim depreciation deductions under the “old” regime. Practically, the new system only applies to individual investors, discretionary trusts and Self-Managed Superannuation Funds;
  • The new law applies only to “depreciating assets.” The new law does not seek to limit deductions for capital works. That is, the depreciation on buildings will continue to be available at 2.5% or 4%, depending on the type and use of the of building;
  • The new laws have effect from 1 July 2016. Accordingly, any properties acquired after this date will be subject to the new regime. Except in limited circumstances, properties that were acquired prior to 1 July 2016 will be grandfathered under the old regime;
  • As announced in the budget, the new regime limits depreciation deductions to items of plant and equipment (i.e. not buildings work) that have been purchased by the taxpayer. Accordingly, any items of plant and equipment that are paid for by the taxpayer and installed ready for use by the taxpayer will still be entitled to depreciation deductions;
  • Depreciation will not be able to be claimed under the new regime if the items are second hand. Only items that are first used in a residential rental property will be depreciable;
  • You should be able to claim depreciation on the items of plant and equipment that are acquired as part of an off the plan purchase.

As with many items in taxation, there are certain exemptions and concessions available. Should you wish to discuss your personal circumstances and how the new regime will impact you, please do not hesitate to contact your ESV engagement partner.