Second-hand depreciating assets you can't claim
Second-hand depreciating assets are depreciating assets that were already installed ready for use or used:
- by another entity (except as trading stock)
- in your private residence
- for a non-taxable purpose, unless that use was occasional (for example, staying at the property for one evening while carrying out maintenance activities would be occasional use).
Second-hand depreciating assets for residential rental properties are generally things that were in a property when you purchased it, or your private residence that you later rent out.
You can’t claim a deduction for certain second-hand depreciating assets unless you are either:
- using the property in carrying on a business (including a business of letting rental properties)
- one of the following
- corporate tax entity
- superannuation plan that is not a self-managed super fund
- public unit trust
- managed investment trust
- unit trust or a partnership, where all of the members are entities of a type listed above.
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 7:30 pm on 9 May 2017
- you installed it into your rental property before 1 July 2017.
Example: Tim's rental property
Sue purchased her house in 2009. In October 2024, she listed her house for sale. While it was advertised, she moved out and replaced the carpet. No one lived in the house while it was advertised. The house was then sold to Tim. After purchasing the property, Tim rented it out immediately.
Tim can't claim a deduction for the decline in value of the depreciating assets in the property because they were all previously used. He also can't claim a deduction for the decline in value for the carpet because he didn't own the asset when it was first installed ready for use.
End of example
Example: asset used privately
Eliza purchased a dishwasher in April 2017 and used it for private purposes at home (her main residence). In July 2019, she installed this dishwasher in her residential rental property. Eliza can't claim deductions for the dishwasher's decline in value because:
- she had previously used it privately, and
- she installed it in her rental property after 30 June 2017.
Home turned into a residential rental property
If you turn your home into a residential rental property on or after 1 July 2017, you can't claim a deduction for the decline in value for depreciating assets that were in your home. You can only claim a deduction for the decline in value for any new depreciating assets that you purchase for your residential rental property.
Example: changing main residence as a residential property
At the start of 2016, Kendrick purchased a home as his main residence. In August 2017, Kendrick moved out and rented out the property fully furnished, which included the furniture and fittings he had been using while living there.
As Kendrick's home was made available for rent on or after 1 July 2017, he is not able to claim a deduction for the decline in value for any remaining effective life of the used depreciating assets in it.
Kendrick can claim a deduction for the decline in value of the new depreciating assets that he purchases for his rental property.
End of exampleExceptions – when you can claim
You can claim a deduction for the decline in value of second-hand depreciating assets if any of the following apply:
- You are carrying on a business of letting rental properties.
- You purchased your residential rental property or a second-hand depreciating asset for your residential rental property before 7:30 pm (AEST) on 9 May 2017.
- You used a depreciating asset that you acquired before 7:30 pm (AEST) on 9 May 2017 and then, before 1 July 2017, you installed it at your residential rental property.
- Your rental property is not used to provide residential accommodation; for example, it is let out for commercial purposes (such as a doctor's surgery).
- The entity that owns the residential rental property is an excluded entity.
- The income generating activities at your rental property are unrelated to providing residential accommodation (for example, solar panels used in generating income from the sale of electricity).
Example: claiming the decline in value of second-hand assets
Sharon has been renting out her residential property since September 2015. In March 2017, she purchased a second-hand fridge to replace the fridge that had broken down.
Because Sharon purchased the second-hand fridge for her rental property before 7:30 pm on 9 May 2017, she can claim a deduction for the decline in value for any remaining effective life of the asset.
End of example
Example: second-hand depreciating asset
Don purchased a second-hand clothes dryer and installed it in his residential rental property on 8 May 2017.
Assuming the dryer had 5 years of remaining effective life, Don can claim deductions for its decline in value for 5 years because he had purchased and installed the dryer before 9 May 2017.
End of exampleHome turned into a rental property before 1 July 2017
If you turned your home into a residential rental property, you can only claim a deduction for the decline in value of assets in it if both of the following apply:
- You purchased your home before 7:30 pm on 9 May 2017.
- You turned your home into a residential rental property before 1 July 2017.
Example: assets bought after 9 May 2017
At the start of 2016, Marty purchased a home as his main residence.
In June 2017, Marty moved out and rented out the property fully furnished, which included the furniture and fittings he had been using while living there.
As Marty rented out his home before 1 July 2017, and he purchased it before 7:30 pm on 9 May 2017, he can claim a deduction for the decline in value for any remaining effective life of the used depreciating assets in it.
However, from the 2017–18 income year, Marty can’t claim a deduction for the decline in value of any second-hand depreciating asset that he purchases and installs after 7:30 pm on 9 May 2017.
If Marty:
- Moved out in June 2017 and the property was vacant until he made it available for rent in July 2017, he couldn’t claim a deduction for the decline in value for any remaining effective life of the used depreciating assets in it.
- Purchased a new asset for the rental property after he moved out, he can claim a deduction for its decline in value, as the asset wasn’t previously used.
For more information on depreciation, including a list of rental property items that can be depreciated, see the Rental properties guide or the Guide to depreciating assets.