Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 259

EOFY and new depreciation rules for property

In one of the most dramatic changes to property depreciation legislation in more than 15 years, Parliament passed the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 in 2017.

The legislation means owners of ‘second-hand’ residential properties (where contracts were exchanged after 7:30pm AEST on 9 May 2017) will be ineligible to claim depreciation on plant and equipment assets, such as air conditioning units, solar panels or carpet. It is an integrity measure which addresses concerns that some plant and equipment assets were being depreciated by successive property investors in excess of their actual value.

What’s unaffected by the new legislation?

The good news is that there are still thousands of dollars to be claimed by Australian property investors, as there has been no change to capital works deductions, a claim available for the structure of a building and fixed assets such as doors, basins, windows, or retaining walls.

The capital works deduction is available on residential investment properties that commenced construction after 15 September 1987. These deductions typically make up between 85-90% of an investor’s total claimable amount. This includes any capital works carried out by the current or a previous owner.

Existing depreciation legislation will be grandfathered. Investors can claim depreciation for plant and equipment assets that form part of a residential investment property purchased prior to 7:30pm on the 9 May 2017 (including contracts already entered into at that time). Investors who fall into this category can claim depreciation deductions until they either no longer own the asset, or until the asset reaches the end of its effective life.

Investors who purchase new residential properties and commercial property owners or tenants who use their property for the purposes of carrying on a business are also unaffected.

Superannuation funds that hold residential property (other than SMSFs) will not be affected, nor will public trusts and managed investment trusts or corporate tax entities.

Owners of second-hand properties who exchanged after 7:30pm on 9 May 2017 will still be able to claim depreciation for plant and equipment assets they purchase and directly incur an expense on.

Impact on new owners of second-hand residential property

A property owner will not be able to claim depreciation on pre-existing plant and equipment assets within properties which have been lived in as a primary place of residence where the owner decides to rent the property out after 1 July 2017. Plant and equipment assets within this scenario are considered previously used. Any additional work to such a property completed by the current owner is classified as capital improvements and claimed as normal. This includes both capital works and plant and equipment.

If a property is considered to have been substantially renovated by the previous owner for selling purposes, then an investor can claim depreciation on the new plant and equipment assets along with any new or old qualifying capital works deductions available. If an entity has previously been entitled to any depreciation deductions for these assets, or if someone lived in the property before it was held by the current owner, then they will not be able to claim any ongoing plant and equipment depreciation on the assets. These assets will be included in a capital loss depreciation schedule for the purposes of claiming a capital loss, allowing the owner to adjust their CGT liabilities where applicable.

It’s important to work with a specialist Quantity Surveyor to ensure that all deductions are identified and claimed correctly under the new legislation. For investors who are planning on selling a property affected by the new rules, a depreciation schedule can be provided to assist them and their accountant to perform a calculation adjustment for CGT liabilities.

More about the new depreciation legislation and how this applies to a range of property investment scenarios, is available in this document: Essential facts: 2017 Budget changes and property depreciation.

 

Bradley Beer is the Chief Executive Officer of BMT Tax Depreciation. This article is general information and does not consider the circumstances of any investor.

RELATED ARTICLES

Maximising your property tax depreciation and claims

How property spruikers target SMSFs

Tax deductions are still available for property investors

banner

Most viewed in recent weeks

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

The rubbery numbers behind super tax concessions

In selling the super tax, Labor has repeated Treasury claims of there being $50 billion in super tax concessions annually, mostly flowing to high-income earners. This figure is vastly overstated.

With markets near record highs, here's what you should do with your portfolio

Markets have weathered geopolitical turmoil, hitting near record highs. Investors face tough decisions on valuations, asset concentration, and strategic portfolio rebalancing for risk control and future returns.

Latest Updates

Investment strategies

Finding income in an income-starved world

With term deposit rates falling, bonds holding up but with risks attached, and stocks yielding comparatively paltry sums, finding decent income is becoming harder. Here’s a guide to the best places to hunt for yield.

Economy

Fearful politicians put finances at risk

A tearful Treasury chief, a backbench rebellion, and crashing bonds. What just happened in the UK and why could Australia’s NDIS be headed for the same brutal fiscal reality?

Shares

Investing at market peaks: The surprising truth

Many investors are hesitant to buy into a market that feels like it’s already climbed too far, too fast. But what does nearly a century of market history suggest about investing at peaks?

Shares

Chinese steel - building a Sydney Harbour Bridge every 10 minutes

China's steel production, equivalent to building one Sydney Harbour Bridge every 10 minutes, has driven Australia's economic growth. With China's slowdown, what does this mean for Australia's economy and investments?

Investment strategies

Will stablecoins change the way we pay for things?

Stablecoins have been hyped as a gamechanger for the payments industry. But while they could find success in certain niches, a broader upheaval of Visa and Mastercard's payments dominance looks unlikely.

Infrastructure

An investing theme you can bet on for the next 30 years

Investors view infrastructure as a defensive asset class rather than one with compelling growth prospects. These five tailwinds for demand over the coming decades suggest that such a stance could be mistaken.

Investment strategies

A letter to my younger self: investing through today's chaos

We are trading through one of history's most confounding market environments. One day, financial headlines warn of doomsday scenarios. The next, they celebrate a new golden age. How can investors keep a clear head?

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.