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

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Welcome to Firstlinks Edition 627 with weekend update

This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.

  • 4 September 2025

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Why super returns may be heading lower

Five mega trends point to risks of a more inflation prone and lower growth environment. This, along with rich market valuations, should constrain medium term superannuation returns to around 5% per annum.

Super crosses the retirement Rubicon

Australia's superannuation system faces a 'Rubicon' moment, a turning point where the focus is shifting from accumulation phase to retirement readiness, but unfortunately, many funds are not rising to the challenge.

Latest Updates

Investment strategies

Why I dislike dividend stocks

If you need income then buying dividend stocks makes perfect sense. But if you don’t then it makes little sense because it’s likely to limit building real wealth. Here’s what you should do instead.

Superannuation

Meg on SMSFs: Indexation of Division 296 tax isn't enough

Labor is reviewing the $3 million super tax's most contentious aspects: lack of indexation and the tax on unrealised gains. Those fighting for change shouldn’t just settle for indexation of the threshold.

Shares

Will ASX dividends rise over the next 12 months?

Market forecasts for ASX dividend yields are at a 30-year low amid fears about the economy and the capacity for banks and resource companies to pay higher dividends. This pessimism seems overdone.

Shares

Expensive market valuations may make sense

World share markets seem toppy at first glance, though digging deeper reveals important nuances. While the top 2% of stocks are pricey, they're also growing faster, and the remaining 98% are inexpensive versus history.

Fixed interest

The end of the strong US dollar cycle

The US dollar’s overvaluation, weaker fundamentals, and crowded positioning point to further downside. Diversifying into non-US equities and emerging market debt may offer opportunities for global investors.

Investment strategies

Today’s case for floating rate notes

Market volatility and uncertainty in 2025 prompt the need for a diversified portfolio. Floating Rate Notes offer stability, income, and protection against interest rate risks, making them a valuable investment option.

Strategy

Breaking down recent footy finals by the numbers

In a first, 2025 saw AFL and NRL minor premiers both go out in straight sets. AFL data suggests the pre-finals bye is weakening the stranglehold of top-4 sides more than ever before.

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.