Savvy Investors Reap Rewards of Knock Down & Rebuilds
With land scarce, some small to medium sized property developers and investors are looking at knocking down older properties and rebuilding new residential homes as a viable investment strategy. Homes on large blocks that can be subdivided are ideal. In these cases, investors need to factor in rising building costs, as well as additional fees for approvals, subdivision, plus demolition and removal of existing sewer or power lines, and existing structures. Many of these costs can be included as tax deductions provided the properties are held or sold as investments.
One of the largest tax deductions you can claim is depreciation. On newly built properties, you can claim depreciation allowances for both the Building and Plant & Equipment assets (Divisions 43 & 40).
In this case study, our NBtax team were engaged to prepare a depreciation schedule for clients who purchased a newly built townhouse at High Street, Reservoir in Victoria. The townhouse formed part of the High Street Collection complex built in the popular Reservoir district close to transport, schools, shops and other amenities. The property features upmarket appliances, fittings and fixtures, plus secure parking, and common entertainment areas.
Our team calculated up to $16,012 in depreciation deductions during the first full financial year for our clients. Over the next 40 years, a further $280,744 in deductions are available for our clients to claim for both the Building and Plant & Equipment.
Typical assets included:
- Air conditioning units
- Timber floor covering
- Solar hot water
- Kitchen appliances including dishwashers, exhaust and range hoods, ovens, stoves
- Dryers and washing machines
- Security systems and equipment
- Fire control and alarm systems
- Furniture and fittings eg. outdoor free-standing furniture, plus barbeque
Our comprehensive and accurate depreciation report will enable our clients to offset rental income and reduce their taxes.
Regardless of your investment strategy, always engage professionals who are Registered Tax Agents and have experience with construction and tax legislation. To order your depreciation report contact our NBtax team.