The most basic way to understand a house depreciation report is by stating a question followed by an example. Is it possible to claim depreciation on equipment and plant on a home which is just used for holidays? Or, can I use it only once or twice throughout the entire year? It is considered to be one of the biggest grey areas, which is a part of the entire legislative changes. It is something which further requires clarification when moving forward with this very situation.
There are numerous ways through which one can make the other understand the house depreciation report. And that is by generating examples after examples along with potential situations that can take place.
Understanding the House Depreciation Report
Starting with ‘The Government’, from the Housing Tax Bill Memorandum, it clearly states – if the respective property is ‘occasionally used’ or use through an ‘incidental way’, then the depreciation eligibility you are bound with goes on and doesn’t stop. It only occurs if you happen to acquire your equipment and plant before ‘The Budget’ gets introduced in the month of May 2017.
Let us understand where ‘Incidental Use’ takes us
One’s usage is considered to be incidental if the number of times the property has been used lies in a minor scale and arises when it is connected with the other non-incidental usage. Let’s take an example to have a better understanding. “If you stay at your property for a single evening and at the same time, carry out the maintenance activities”. This very situation would fall into the category of an ‘incidental use’.
Now let us understand what ‘Occasional Use’ is?
The term ‘Occasional Use’ clearly signifies the meaning itself. If you are spending the weekend in your holiday home or even giving an allowance to your relatives or known ones to stay at the same home for a weekend with no charges. This situational act then can be referred to as ‘occasional use’. The example is quite vague, but doesn’t it solve your query?
Well, let’s take another example for that matter. ‘If you are spending one week in an entire year at your holiday home, does this situation nullify the whole claim? What if, you plan on staying at the same place for Christmas and Easter?’
This can cause a whole set of further questions. Questions such as ‘do all the landlords of Airbnb carry out their building tax depreciation claims and then set to move in when the time is quiet but then acquired the whole property prior to the respective budget?
Such landlords might have gone into making such investments with mathematical calculations so that they can claim the house depreciation report. This can also be done through the pro-rata basis, which is further based on the tax laws carried out at that time.
With such combinations, now if they happen to utilise the very same apartment for an ‘x’ amount of time, the depreciation deduction might get disallowed.
Know what the Memorandum has to say?
In the meanwhile, while the Memorandum does not provide a right frame of time, it indicates that out of every possibility, a weekend spent comes out to be a bit okay. Who knows, how can an individual stretch the number of weeks spent at their respective properties? Well, you might have to pick a number?
This is done at a time when the Australian Taxation Office (ATO) wants to lay their target on Airbnb hosts. This also works by pro-rata any gain tax exemptions on the capital, if only they are applicable.
It largely depends on us, how we figure the house depreciation report out. To conclude this explanation, if your holiday home happens to be out or clearly for rent for eleven months in a year, it will still be considered as your investment property.