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NBtax Tax Bites

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Buying Old vs New Properties

It’s fair to say, the property market has shown remarkable resilience during the pandemic with residential property values generally remaining steady or improving depending on the locality. With many people taking advantage of low interest rates to buy properties for themselves or as investments, the question of whether to buy old or new remains.

From a tax depreciation perspective buying new offers greater opportunities to claim assets. New includes – newly constructed free-standing houses, townhouses, and apartments. All plant and equipment assets such as appliances, hot water systems, carpets, blinds, security systems, pool equipment, furniture and others can be claimed.

The legislation is straightforward for new residential investment properties, where assets are included in the original build and sold by the developer or builder. Depreciation on plant and equipment associated with these properties is claimable. This includes assets and equipment shared by property owners in residential apartment complexes such as tennis courts, gyms, saunas, outdoor entertainment areas, cinemas, furniture, security systems and lifts.

Legislative changes that came into effect a few years ago meant older or pre-existing residential properties purchased after 9th May 2017 are eligible for depreciation on the Building component only. The plant and equipment belonging to these properties are considered previously used and no longer claimable.

The good news is you can claim renovations and new assets such as stovetop, oven, rangehood, dishwashers, air conditioners and other equipment.

Another popular trend among homeowners taking advantage of the Federal Government’s HomeBuilder Grant is to build a new home and keep their existing home as an investment. In this case, if your existing residential property was used as your primary place of residence, and became an investment property generating rental income after the 1st July, 2017, the same conditions would apply. Essentially, you can claim depreciation allowances for the Building (Division 43) and new Plant & Equipment assets (Division 40).

Whether buying old or new residential properties for investment, you can claim depreciation deductions on the building for up to 40 years. Depreciation allowances on Plant & Equipment assets will vary depending on when these were purchased but essentially these can be claimed for their effective life.    

Savvy investors realise the value of claiming depreciation to offset rental income and manage cash flow. Our job is to ensure you receive an accurate and compliant depreciation schedule to claim allowances. Our experienced team of Property Analysts and Quantity Surveyors understand tax legislation and construction costs. Use only the best to gain the best result for your investment property. Order your report today.