The 2017 Federal Budget Announcement laid down several measures to improve housing affordability, as well as helping first buyers get a foothold in the property market with the First Home Super Saver scheme. But that’s not all; things are changing for property investors as well.

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No deduction for travel expenses

Starting first of July, owners of negatively geared properties will no longer be able to claim tax deductions for travel expenses such as visiting their investment properties for inspection, maintenance or collection of rent. The measure that will ensure investors can no longer enjoy ‘paid’ holidays under the garb of servicing their rental properties will also help the government raise a substantial amount of money over the next four years. Luckily for investors, the fees paid to real estate agents for managing their overseas properties continues to be fully tax deductible.

Depreciation Deductions

The Federal Budget also announced changes to depreciation deductions, but these changes only affect Investors who exchange contracts for an established residential property after 7.30 pm, 9th May 2017.

The majority of investors, including those who are already claiming depreciation for a property purchased before 7.30 pm, 9 May 2017 (when the federal budget for 2017 was announced), or those who are first time owners of new properties, remain unaffected. Thus, unless you buy an established residential property as an investment after the above mentioned date, you can continue claiming depreciation for the building as well as plant and equipment assets used in the building as before.

However, many property investors make the folly of not getting a depreciation schedule prepared by a quantity surveyor and try to guess their costs, leading to the lodging of incorrect claims as well as loss of money due to incorrect classification of capital works and plants and equipment assets.

What is Depreciation?

With time, buildings, as well as equipment used in buildings, undergo wear and tear. This is known as depreciation. The ATO allows property owners who generate income from their properties to claim this depreciation as a tax deduction.


With the present financial year coming to an end, investors must get a depreciation schedule prepared by a professional quantity surveyor to maximise their benefit. The fee for getting a depreciation schedule prepared is fully tax deductible.
Read the EOFY tips to maximise your tax refund.

Two kinds of deductions are allowed – Capital works deductions and deductions for plant and equipment assets

Capital works deductions refer to structural wear and tear of the property and are calculated by taking into account the construction date, construction cost and type of the property.

Deductions for plant and equipment assets refer to the deductions for removable assets used in a building such as heaters, air conditioners, exhaust fans, ceiling fans, carpets and security systems. The deductions for these items are calculated according to their effective life, updated and regularly notified by the ATO.

What has changed?

Until now, any investor purchasing an established residential property could claim depreciation for the second-hand plant and equipment assets that came with the property. For example, if Ruth purchased an apartment from John who had owned it for the past seven years as an investment property, Ruth could claim depreciation on the dishwasher (for the remainder of its effective life) installed by John as the new owner of the property.

However, investors exchanging contracts for established residential properties after 7.30 pm, 9 may 2017, will no longer be able to claim depreciation on plant and equipment assets that are acquired as a part of the property. Thus, in such a situation, the dishwasher bought by John and acquired by Ruth as a part of the established property does not qualify as a depreciable asset for her.


– No changes have been made to capital works deductions
– Investors purchasing new properties continue to claim depreciation as before
– Investors already claiming (or entitled to claim) depreciation for properties purchased before 7.30 pm, 9 May 2017, continue to claim depreciation as before

Listen up, investors!

It makes sense to crunch the numbers and think twice before purchasing an established property. With the latest changes all set to erase thousands of bucks of tax deductions, buying an established property may no longer be as profitable as buying a new one. However, some other factors such as price, rental yield and neighbourhood must be taken into consideration before making a decision. Here’s a handy investment guide to help you choose your investment strategy.

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By Vidhu Bajaj
HashChing Content Writer



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