2017 Budget Comment – What is “new”

How did the definition of “new” become so blurred overnight?

It has been a week since the Budget was presented and confusion reigns among some within the property industry as clarification is sought over what is considered new.

The confusion surrounds the circumstance where a developer constructs a block of units (for example) and, as part of each unit, there is plant and equipment (Division 40 Items i.e. dishwasher, oven, carpets, blinds, etc). As the developer paid for the plant and equipment items, there is suggestion that he/she may be considered the first owner thereby relinquishing any depreciation entitlements by the subsequent purchaser of the new unit?

For me the answer lies in the following:

• Is the developer using the plant and equipment? Answer: No. The item remains unused (i.e. new).
• Is the developer deriving a passive income from the plant and equipment? Answer: No.
• Is the developer depreciating the plant and equipment? Answer: No.

From my perspective, the proposed changes intend to restrict plant and equipment depreciation so that the investor who acquires the property new, from the builder/developer and/or engages the builder to construct the property, is the only taxpayer claiming depreciation on the plant and equipment i.e. subsequent investors who acquire the property secondhand are not entitled to depreciate the same items again. Subsequent investors will be able to claim depreciation on items of plant and equipment where they replace or add such items.