21 June

Brand new investment properties generate biggest tax deductions for depreciation

The benefits of buying brand new property for your investment are many - there is less repairs and maintenance, they're attractive to tenants, and importantly they generate the greatest tax deductions for depreciation.

Why do brand new properties generate bigger deductions for depreciation?

  1. The higher construction cost - capital allowance and depreciation are calculated from construction costs and asset values. Brand new properties have higher construction costs than those built historically, and the assets included are also of a higher cost/value than older assets.  Depreciation calculated against a higher construction and asset cost will result in bigger annual deductions;
  2. Maximum effective lives of building and assets - unlike older properties that have already lost some depreciation value in the years since they've been built, a brand new property will still have 40 years of deductions left available in the building. The assets will also have maximum effective lives remaining as they have not aged already;
  3. Brand new assets still qualify since the change in legislation - buying a second hand property today would mean you are unable to claim annually for the depreciation of the second-hand assets. When buying brand new however, all the assets still qualify for annual depreciation deductions.
  4. Immediate write-off of low-cost assets - all of the low cost assets within a brand new property can be claimed immediately in year 1 of ownership. When aggregated together, this can equate to thousands of dollars in additional tax deductions, that would not be available in a second-hand property.

How much depreciation could you claim on a brand new investment property?

Brand new houses and units can typically generate tens of thousands of dollars in tax deductions for depreciation in just the first few years of ownership.  See the table below for an indication of the value of tax deductions available.

Tax Depreciation available in brand-new properties

* A small complex is one with only a few levels, no elevator, few shared facilities and small common area.

** A large complex is one with many levels, elevators, large common areas and shared facilities such as gymnasium, pool etc

For more information about what depreciation is and how it benefits property investors, please visit our website www.capitalclaims.com.au.

Would you like to discuss your investment property?

Contact our friendly team to discuss your property and find out what depreciation deductions are available to you.  We provide free, all inclusive quotes and estimates of deductions up-front so you can feel confident before proceeding.  Get in touch today on 1300 922 220. 

Related articles:

What tax depreciation deductions can I claim from my brand-new investment property?

How to use tax depreciation to help your cash flow now

 

click to estimate tax depreciation deductions for rental property

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