Depreciation rulings for landlords

The Australian Taxation Office now has tight first-year depreciation deductions on investment properties. Since July 1, 2004, the ruling on the effective life of depreciating assets excludes fittings and fixtures from a list of items that can be claimed as plant.

But the ATO has added certain appliances like range-hoods and dishwashers, as well as accelerating depreciation for items such as cooktops and blinds. The 150 items that landlords may now treat as depreciating assets is a "substantial increase" over the previous list, according to the Tax Commissioner. Under the old system, property investors received the major part of depreciation concessions in the first five years.

Most fittings and fixtures were treated separately as plant and depreciated at a rate of 18.75 per annum for five years. Buildings can only be written off at a rate of 2.5 per cent a year over 40 years. A depreciation expert estimated that on a new or nearly-new $400,000 property, a buyer would lose immediate tax breaks of between $6,000 and $8,000 in the first year from the $10,000-$16,000 received under the previous system.