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Edited version of private advice
Authorisation Number: 1051534826613
Date of advice: 26 June 2019
Ruling
Subject: Capital gains tax - depreciation - rental properties
Question:
Are you entitled to claim decline in value deductions for existing second hand depreciating assets installed ready for use under subsection 40-27(2) of the Income Tax Assessment Act 1997 (ITAA 1997) when the property was purchased?
Answer:
Yes.
From 1 July 2017, resulting from The Treasury Laws Amendment (Housing Tax Integrity) Act 2017 (No.126, 2017), which received Royal Assent on 30 November 2017, there are new rules under section 40-27 of the ITAA 1997 for deductions for decline in value of certain second-hand depreciating assets where you hold a rental property.
In this case the new rules do not apply to you. It does not prevent you claiming deductions for the decline in value for any remaining effective life of any existing second-hand or used depreciating asset located in the Property when it was purchased because:
· you entered into the contract to purchase the Property prior to 9 May 2017, with settlement occurring after 1 July 2017;
· your intention when you purchased the Property was to earn rental income from renting out the Property;
· the Property was rented out once settlement on the Property's purchase had occurred; and
· the Property has not been your residence and it is not your intention to reside at the Property.
Further information can be found by searching for Quick codes 'QC 23636', 'QC 51990' and 'QC 55249' on our website www.ato.gov.au.
This ruling applies for the following period:
Income year ending 30 June 2018
The scheme commences on:
1 July 2017.
Relevant facts and circumstances
You entered a contract to purchase the Property prior to 9 May 2017.
The vendor had requested an extended settlement period until after 1 July 2017. During that period the vendor continued to reside at the Property rent free.
The Property was listed and rented out immediately after settlement occurred and continues to be rented until the present time.
You did not have any intention to reside in the Property when it was purchased, and have never resided there until the present time.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 40-25
Income Tax Assessment Act 1997 section 40-27
The Treasury Laws Amendment (Housing Tax Integrity) Act 2017 (No.126, 2017)