The federal government proposed changes to depreciation legislation in the 2017 budget that are due to come in to force on 1 July 2017.
The changes mean that investors who acquire a property after 9 May 2017 will not be able to claim depreciation on existing plant and equipment assets in the property. Those who purchased an investment property before 9 May 2017 will be able to claim depreciation as per normal.
Speaking to Accountants Daily, BMT Tax Depreciation CEO Bradley Beer said the measure is looking to prevent investors from exploiting a gap in the legislation and claiming deductions on assets that have already been depreciated.
“I think their intention is to stop people from double dipping because the legislation has a bit of a gap I suppose across plant equipment items where people can depreciate something that's already been depreciated,” he said.
“So they're trying to stop the double dipping issue but they've actually gone a bit further than that, where they're stopping anyone from claiming on second-hand property any deductions for the plant equipment that they didn't purchase themselves.”
Mr Beer expressed concern that what the government is proposing goes beyond the intent of what they’re trying to do.
“I think it's going beyond that intent to attack any investor who buys a second-hand property because it applies to positively-geared properties and negatively-geared properties, it applies to all of the assets in a second-hand property that could be nearly new, meaning they should still have an effective life,” he said.
“I think it's going beyond the original intent of getting rid of the double dipping type arrangements as an integrity measure.”