New Tax Ruling 2019/5
First residential effective life change in 14 years
Each new financial year the Australian Taxation Office (ATO) releases the latest Tax Ruling outlining changes to the effective lives of some plant and equipment assets.
Generally, the changes relate to the effective lives of commercial property assets. However, in Tax Ruling (TR) 2019/5, there were a number of changes made to depreciable assets found in residential properties for the first time in fourteen years.
BMT Tax Depreciation’s recommended effective life changes in TR 2019/5
Last year BMT Tax Depreciation made a submission to the ATO recommending some more practical effective lives for particular assets. We also recommended the commissioner introduce a number of assets that were not previously specified.
The following table shows the list of recommendations made by BMT that have now been added and stated in TR 2019/5
|Plant and equipment asset||Effective life (years)||Diminishing value rate||Prime cost rate|
|Digital peep holes||10||20%||10%|
|Single residence pressure pumps||8||25%||12.50%|
|Folding arm awnings:|
|Swimming pool assets:|
|Covers (including blankets)||8||25%||12.50%|
Plant and equipment assets with changed effective lives in TR 2019/5
Along with the new assets, some existing assets have reduced effective lives outlined in TR 2019/5 include television sets, telephone handsets, microwave ovens,spa bath pumps, dishwashers, washing machines, clothes dryers, solar garden lights, freestanding bathroom accessories and carpet.
As a result of the effective life changes view the diminishing value and prime cost rates in the links below:
Effective life >
|Plant and equipment asset||Previous effective life (years)||New effective life (years)|
|Bathroom accessories freestanding (including shower caddies, soap holders, toilet brushes)||5||3|
|Fixed evaporative coolers (excluding ducting and vents)||20||15|
|Garden lights solar||8||5|
|Home automation control assets||n/a||10|
|Ironing boards freestanding||7||5|
|Spa bath pumps||20||10|
|Spa filtration assets (including pumps)||12||10|
|Swimming pool chlorinators||12||10|
|Swimming pool filtration assets (including pumps)||12||10|
Diminishing value rate >
|Plant and equipment asset||Previous diminishing value rate||New diminishing value rate|
|Bathroom accessories freestanding (including shower caddies, soap holders, toilet brushes)||40.00%||66.67%|
|Fixed evaporative coolers (excluding ducting and vents)||10.00%||13.33%|
|Garden lights solar||25.00%||40.00%|
|Home automation control assets||n/a||20.00%|
|Ironing boards freestanding||28.57%||40.00%|
|Spa bath pumps||10.00%||20.00%|
|Spa filtration assets (including pumps)||16.67%||20.00%|
|Swimming pool chlorinators||16.67%||20.00%|
|Swimming pool filtration assets (including pumps)||16.67%||20.00%|
Prime cost rate >
|Plant and equipment asset||Previous prime cost rate||New prime cost rate|
|Bathroom accessories freestanding (including shower caddies, soap holders, toilet brushes)||20.00%||33.33%|
|Fixed evaporative coolers (excluding ducting and vents)||5.00%||6.67%|
|Garden lights solar||12.50%||20.00%|
|Home automation control assets||n/a||10.00%|
|Ironing boards freestanding||14.29%||20.00%|
|Spa bath pumps||5.00%||10.00%|
|Spa filtration assets (including pumps)||8.33%||10.00%|
|Swimming pool chlorinators||8.33%||10.00%|
|Swimming pool filtration assets (including pumps)||8.33%||10.00%|
The new ruling replaces TR 2018/4 and is effective from the 1st of July 2019.
Most common and lucrative residential assets among the TR 2019/5 changes
Among the affected items with changed effective lives were two of the most common and lucrative plant and equipment assets BMT find when completing depreciation schedules for residential properties.
Appearing in 99.8 per cent of residential property depreciation schedules completed in FY 2018/19, freestanding bathroom accessories were the most common depreciable assets found by BMT. These assets saw their effective life reduced from five years to just three.
Carpet was the most lucrative asset found by value by BMT in FY 2018/19, resulting in $29,904,067 in total deductions for all residential schedules and an average of $3,567 in deductions per report. This asset saw its effective life reduced from ten to eight years.
What do the changes to effective lives outlined in TR 2019/5 mean for investors?
The changes mean the ATO believe the wear and tear of these assets over time result in their value depreciating faster and they will need replacing sooner.
The changes to the effective lives of these and other residential assets could influence when an investor chooses to make improvements and replacements.
The date that a plant and equipment asset is acquired will determine the effective life used. This is because previously approved determinations can still be used for assets acquired within periods stipulated by previous rulings.
Commercial industries affected by TR 2019/5 changes to effective lives
TR 2019/5 also included adjusted effective lives for assets found in other industries including banking, building society and credit union operations, financial and insurance services, scientific testing and analysis services, retirement villages and wholesale trade operators.
Learn more about the latest tax ruling today
For a copy of the tax ruling with details of all of the plant and equipment assets affected, email firstname.lastname@example.org
You can also visit BMT Rate Finder to search and find the effective life and depreciable rate for any asset today.