Will Legislation pass to Limit plant and equipment depreciation deductions to outlays actually incurred by investors for residential rental property?

Will Property investors lose out due to proposed budget changes?

Legislation is currently being developed for this measure.

Personally I am concerned this measure might have unintended consequences.

Not all legislation gets through – and at this point the legislation is being developed and drafted…….so here is the background.

On 9 May 2017 the Government announced that from 1 July 2017, plant and equipment depreciation deductions will be limited to outlays actually incurred by real estate property investors. If may actually be that even though they are purchasing a property they will not be able to claim the Division 40 items that they currently are entitled too.

The plan is that …InvThe theory sounds goodestors who purchase plant and equipment for their residential property investment after 9 May 2017 property owners may/will be un/able to claim deductions for plant and equipment purchased by a previous owner of the property.

Who knows it is not law yet. Personally – I am worried about unintended consequences.

The reasoning used is the Government wants to Limit plant and equipment depreciation deductions to outlays actually incurred by investors.

Depreciation deductions for plant and equipment available to investors will be restricted from 1 July 2017 to where the costs have actually been incurred by the investors in residential real estate properties. This restriction will not apply to deductions in respect of existing investments, and existing plant and equipment forming part of residential investment properties as of 9 May will continue to provide deductions for depreciation until disposal or end of effective life.The Government intends this restriction to address concerns that depreciation deductions are being claimed by successive investors in excess of their actual value. Investors purchasing plant and equipment after 9 May for residential investment properties will still be able to claim a deduction for the effective life of the property, but subsequent owners will not be able to continue to claim the same deductions.

It is anticipated that existing plant and equipment items acquired will be reflected in the capital gains tax cost base for subsequent purchasers.

What are you thoughts?

Currently investors are allowed to claim depreciation on existing plant and equipment – Jodie Stanley QS CEO of  Central Queensland Quantity Surveying

Will our houses change to more like in Europe where they take all kitchen appliance?

Will it result in useful and working items to become landfill?

Currently values can be assigned for plant items and Chattel in Special Conditions of contract – Perhaps this could be a simple solution.