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  • Deduction for decline in value of depreciating assets

    You can claim a deduction for the decline in value of certain items, known as depreciating assets, that you acquired as part of the purchase of your property or that you subsequently purchased for your property.

    From 1 July 2017, unless you are carrying on a business of property investing or are an excluded entity you cannot claim for depreciation of second-hand plant and equipment in rental premises used for residential accommodation.

    These changes apply to second-hand plant and equipment you acquired at or after 7.30 pm (AEST) on 9 May 2017 unless you acquired them under a contract entered into before this time. Additionally, you cannot claim for plant and equipment installed on or after 1 July 2017 if you have ever used it for a private purpose

    What is a depreciating asset?

    A depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used. Examples of depreciating assets are freestanding furniture, stoves, washing machines and television sets.

    Our publication Rental properties has a comprehensive list of depreciating assets found in residential rental properties.

    The publications Guide to depreciating assets and Rental properties will help you understand the rules for working out your deduction for decline in value and other aspects of rental property ownership. Guide to depreciating assets contains details of the immediate deduction for assets whose cost (when added to the cost of other substantially identical assets or assets that make up a set) does not exceed $300. It also explains the low-value pool, to which you can allocate depreciating assets:

    • costing less than $1,000 (low-cost assets)
    • written down to less than $1,000 under the diminishing value method (low-value assets).

    If you choose the low-value pool method to calculate the decline in value of low-cost and low-value assets, read Low-value pool deduction.

    See also:

    Capital works deductions

    You may be able to claim a deduction for the construction costs of your property over a 25-year or 40-year period (a capital works deduction).

    You can claim a deduction if construction began after:

    • 17 July 1985 and the property is used for residential accommodation or to produce income
    • 19 July 1982 and the property is not used for residential accommodation (for example, a shop), or
    • 21 August 1979, the property is used to provide short-term accommodation for travellers and it meets certain other criteria.

    A deduction may also be available for structural improvements made to parts of the property other than the building if work began after 26 February 1992. Examples include sealed driveways, fences and retaining walls.

    The deduction does not apply until completion of the construction. The deduction is at the rate of 2.5% or 4% (adjusted for part-year claims) depending on the date the capital works began. Rental properties will help you determine if you qualify and the appropriate rate.

    See also:

      Last modified: 29 Jun 2018QC 16824