Depreciation on a former display home
When a builder sells a display home to an investor, the buyer can claim full Division 40 plant and equipment depreciation — even though the property was previously "used." This surprises many investors who assume that the 2017 budget changes would block them from claiming plant and equipment.
Why display homes are different
The 2017 restriction on plant and equipment applies to residential property where the assets were previously used in a residential capacity. A display home is used for commercial purposes — it is a marketing and sales tool for the builder. It has never been someone's family home.
Because the use was commercial, the assets in a display home are not treated as "previously used" in the residential sense. The ATO permits the incoming investor buyer to claim Division 40 depreciation on the same basis as a brand-new property.
What you can typically claim
Display homes are usually fitted out to a high specification to attract buyers, which means strong depreciation deductions:
- High-quality kitchen appliances (oven, cooktop, rangehood, dishwasher)
- Air conditioning systems
- Premium carpet and floor coverings
- Designer blinds and window treatments
- Ceiling fans and feature lighting
- Integrated security systems
Division 43 — Capital works
The building structure is also claimable at 2.5% per year from the original construction date. A display home is usually new, so you typically get the full 40-year depreciation life.
Getting a quantity surveyor report
You should always order a depreciation schedule from a qualified quantity surveyor when purchasing a display home. They will confirm eligibility, itemise every asset, assign the correct ATO effective life to each, and prepare a schedule you can give directly to your accountant.
Summary
Display homes are one of the better depreciation opportunities in the market. They are typically well-finished, fully equipped, and they qualify for full Division 40 and Division 43 deductions.