Limit on a deduction for the decline in value of second-hand depreciating assets

If you use second-hand assets to earn rental income from your residential rental property, you cannot claim a deduction for their decline in value unless:

  • you are using the rental property in carrying on a business (including a business of letting rental properties), or
  • you are :
    • a corporate tax entity
    • a superannuation plan that is not a self-managed superannuation fund
    • a public unit trust
    • a managed investment trust, or
    • a unit trust or a partnership, if each of its members are entities of a type listed above at that time during the income year.

Otherwise, you can only claim deductions for second-hand or used depreciating assets in residential rental properties if both of the following apply:

  • you purchased the asset before 7.30pm on 9 May 2017; and
  • you installed it into your rental property before 1 July 2017.

Second-hand assets are depreciating assets previously installed ready for use or used:

  • by another entity
  • in your private residence
  • for a non-taxable purpose

If you wish to discuss how the above affects you or if you have any other questions, please do not hesitate to contact our office on 1300 620 345.