Housing Tax Integrity – Limiting Depreciation Deductions – Exposure Draft Released

on a similar topic, if this is still in draft form, does it even apply yet?
what would owners do if they purchased something in June 2017?

 

We had a client last week who recently purchased a property that was about a year old. It had been held by the developer. I can't remember why - perhaps a sale fell over. Given nobody had lived in the property and the Assets had not been 'used', I couldn't see any reason why they couldn't claim the depreciation on them.

 

Yes, that would meet the new condition and possible to claim the depreciation.

So far the draft wording is confusing IMO.

 

To answer my own query, after speaking to ATO.
as it is in draft form, the legislation doesn't apply.
if you purchased something in June 2017, you complete your tax return with the current (old) rules, and once the legislation is law, adjust your lodged tax return as necessary.

 

Yep, you either press on assuming the new rules apply and adjust afterwards if the changes don't go through.
Or use the old rules and adjust afterwards if the new rules do go through.
So it's a punt on the likely outcome.

 

Yes - They appear to require you to look at the use of the assets by the owner OR any other party.

eg : If you allow your kids to reside in a new OTP property for 2 weeks before it gets tenanted then their USE of the assets taints deductibility although as owner you didnt claim a deduction.

I suspect the issue of using the property as soon as practicable after ownership will take on a new meaning. Allowing kids to move in etc could taint issues.

And I also think if you buy assets for the future tenants just before you move out there is also a problem. Technically yes you acquire then but they become "used" even if they arent used. So people who reno or fix a place prior to tenancy ie to their own PPOR will be excluded depreciation deductions but those who leave it vacant and reno will get deductions. A bit silly really.

 

Thats always the case. We saw that with the small business $20K write off laws...Took 5 months into the tax year to become law. If its a material item I would defer lodgement if its an agent lodged return.

Did you find the ATO disregarded your question ? Thats what they do with things that arent yet law.

I doubt many properties affected for the 2017 year.
- Post 9th May 2017 contracts wouldnt have settled at 30 June unless related parties
- We tend to rely on QS reports
We are watching for those who reno and dont have QS reports as they are a higher risk. Especially if its a former PPOR.

 

I wasn't planning on asking my original question, just about the affects of this draft legislation as I wasn't aware of this. As soon as I said it was a general question about the draft depreciation legislation they said they weren't able to comment.

 

Thats the ATO. They dont speculate. They just apply laws when they are enacted. And even then sometimes they have to interpret what the Govt meant or what they think it means. So Determinations, Rulings etc follow.

 

I noticed that it was made law late last year;
Limit plant and equipment depreciation deductions to outlays actually incurred by investors

 

Yes - The draft law is now actual law.

Mod - This thread prob should be closed to avoid confusion and errors in speculation.

For anyone reading past this point the posts above should NOT be relied upon.

 

To go back to my original question about developers treating assets as trading stock while still being used, looks like it is okay for 6 months. I happened to hear in a podcast BMT say, though trying to find it in writing somewhere;

also found some info here;
New Depreciation rules that will affect everyone - Hoffman Kelly

 

I forget the rules about what I can and can't link to on our own website but, if you have a look in the media section, it shouldn't take you long to find our white paper where we dissect everything in detail. If you have any trouble, message me directly.

 

Probably considered self promotion which is rather ridiculous. But if i link to it then ok. End result someone gets information.

Anyway here it is

https://www.bmtqs.com.au/documents/essential-depreciation-facts-2017-budget.pdf

 

thanks, I was struggling to find it.