Second-hand assets for residential rental properties are depreciable items previously used or installed ready for use by your clients or another entity.
In most cases, they are things that were existing in a property when your clients purchased it, or in their private residence that was later rented out.
Items can include things like flooring, window coverings, air conditioners, washing machines, alarm systems, spas, pool pumps and items used for both the rental property and your client’s own home.
Since 1 July 2017, clients can’t claim the decline in value of second-hand depreciating assets, unless the property is used for carrying on a business (for example a hotel) or they are an excluded entity. The change doesn’t apply to properties rented out prior to this date, or where the property is either newly built, substantially renovated (where all or most of a building is removed or replaced), and no one else has claimed a deduction for the assets, no one resided in the property before you acquired it, or your clients acquired the property within six months of the build or substantial renovation.
To ensure items can be claimed there are a few questions that should be asked of clients including when did you purchase the property? Was it a new or existing build? Did you live in the property before renting it out? When did you start renting the property out? Was the asset already in the rental property when you bought it? Is the property used for business purposes?
You can find more information in our 2022 Rental properties guide and tax ruling TR 2022/1.
