In the ever-evolving landscape of property investment and taxation, understanding the implications of tax depreciation is crucial for maximising returns. The 2017 budget changes brought significant modifications to plant and equipment deductions, impacting both old and new properties. In this case study, we will compare the tax depreciation benefits of old properties and new properties, taking into account the changes in plant and equipment deductions.
Let’s consider two scenarios: Property A, an old property exchanged after 7.30pm on the 9th May 2017 and Property B, a brand new built property.
Property A – Old Property:
Property A is a residential property constructed in 2014. It’s a three bedroom brick veneer home set on 600sqm of land that features a double garage, an inground salt chlorinated pool and a 50sqm pergola. The owner purchased and rented the property in 2018.
Property B – New Property:
Property B is a three bedroom brick veneer home which is brand new. Its set on 600sqm of land, has a double garage, an inground salt chlorinated pool and a 50sqm pergola. As a new property, the owner will benefit from the full range of tax depreciation deductions available.
Comparison and Analysis:
Comparing the tax depreciation benefits of Property, A and Property B reveals some notable differences due to the 2017 budget changes.
Property A, the only eligible claim for this property will be the Construction cost (Division 43) only. This is all the fixed items to the building i.e. Inground pool, bricks and mortar and pergola. The property was built in 2018 therefore there will be 35 years of construction cost still eligible to be claimed. TDA Tax Depreciation’s Quantity surveyors has estimated the construction cost to be $400,000 resulting in a $10,000 division 43 claim every year for the next 35yrs.
On the other hand, Property B, being a new property, benefits from the full range of tax depreciation deductions. The owner of property B is eligible for both the plant and equipment (division 40) and Construction Costs (Dicision43). TDA Tax Depreciation’s Quantity Surveyors have estimates the property out at $45,000 ($12,000 in the first year) worth of plant and equipment items (Division 40) and $450,000 ($11,250 in the first year) of Construction Cost (Division 43).
While Property B may have greater overall depreciation benefits, Property A still offers substantial deductions for the Construction Costs claims that were not impacted by the 2017 budget changes. It is essential for property owners to engage a qualified quantity surveyor to accurately assess and determine the eligible deductions based on the specific property and applicable legislation.
The 2017 budget changes had a significant impact on tax depreciation deductions, plant and equipment assets in second hand properties. Property owners need to be aware of these changes and consult with TDA Tax Depreciation, to ensure they maximise their entitlements within the current regulations. To find the likely deductions your eligible for, please call 1300 417 317 or click the chat button to engage with Tax Depreciation specialist right now.
