Lessons from Renovated Investment Property Kenmore
2021 has been a huge year for the building industry. New builds and renovations were a top priority for homeowners and property investors. Savvy investors can claim depreciation on both the Building and Plant & Equipment for their renovated properties and assets, but its all in the timing.
This case study examines the value of depreciation on a renovated secondhand property located in the western suburb of Kenmore in Brisbane. This beautifully renovated family friendly home is elevated with multiple entertaining spaces.
- Five bedrooms with ceiling fans and built-in robes
- Open plan living/dining space opening to entertaining decks
- Ducted air conditioning to the top level
- Modern kitchen with storage, dishwasher, overlooking the pool
- Two spacious elevated entertaining spaces elevated
- Three bedrooms downstairs, plus second living space
- Master bedroom with walk-in robe and modern ensuite
- Two renovated additional bathrooms
- In ground pool,
- 5kw solar system, rainwater tank, ample storage, double carport
Our Property Tax team conducted a thorough investigation of the property and records of capital works, and new plant and equipment purchased to improve the value of the home.
Originally purchased in 2014 as a principal place of residence. While occupying the home, our client renovated the property. After a few years, the home become a rental property. As the rental period was after May 2017 and the renovations were done whilst living in the property, our client is entitled to claim depreciation allowances for the building only, Division 43.
Despite this, our Property Tax team was able to find a total of $159,157 in depreciation deductions to be claimed by our clients over the next 40 years. The lesson from this case study is think through your property strategy carefully to maximise the full benefits of depreciation.
For instance, the ideal scenario would have been for our clients to first vacate the premises and not list this property as their principal place of residence or PPR. Next renovate the property and make it available for rent before 9th May 2017. In this situation, investors could claim both Division 43, and Division 40 for Plant & Equipment assets.
When purchasing secondhand properties or older properties, be aware you can only claim Division 43 for the building, or major capital works. Depreciation allowances will apply to newly purchased and installed white goods, floor coverings, blinds, and other assets to improve the property only.
If you have an investment property purchased prior to May 2017, depending on the age of the property and the assets, you may be eligible to claim depreciation allowances.
To discuss depreciation for your investment property, contact our team.