The claim on depreciation for plant and equipment will be limited to outlays actually incurred by investors in residential real estate properties from 1 July 2017. This is another integrity measure addressing concerns that some plant and equipment items are being depreciated by successive investors in excess of their actual value.
Investors who purchase plant and equipment for their residential investment property after 9 May 2017 will be able to claim a deduction over the effective life of the asset. However, subsequent owners of a property will be unable to claim deductions for plant and equipment purchased by a previous owner of that property. Instead, the costs will be reflected in the cost base for capital gains tax purposes for subsequent investors.
These changes will apply on a prospective basis, with existing investments grandfathered.
Plant and equipment forming part of residential investment properties as of 9 May 2017 (including contracts already entered into at 7:30 pm (AEST) on 9 May 2017) will continue to give rise to deductions for depreciation until either the investor no longer owns the asset, or the asset reaches the end of its effective life.
This measure will put a large dent in the Tax Depreciation market for property purchased after Budget night where the purchaser is not the first owner of the plant & equipment.