A small but growing number of developers and investors are looking outside of the traditional property options when it comes to creating in-demand, positive cash flow properties.

In line with various state-based planning legislations, these savvy developers and investors are making use of the policies relating to New Generation Boarding Houses and Houses with Multiple Occupancies to bring more affordable, community based living to a growing number of renters that see the value in small space living.

The traditional "ideal home" of large bedrooms, multiple living areas and a backyard is not the affordable, nor preferred option for an increasing number of today's renters.  The people most often moving in to these micro apartments and multiple occupancy homes are single women over 50 (the fastest growing proportion of the population at risk of homelessness), young professionals (singles and couples) who want to live close to amenities and their workplaces (saving money and travel times), and single parents with a child who need a safe and affordable home.

From a community perspective these safe, budget friendly homes are much needed, and from an investor perspective they can make a solid investment option.  Whilst there may be additional cost in developing a suitable property for this strategy, many investors are reaping the benefits in the way of higher overall rents (multiple small rents as opposed to one rent), as well as higher deductions for capital works and depreciation.

From a tax depreciation perspective, these affordable housing projects typically have the following advantages over regular houses and units:

  1. The higher initial construction costs results in higher annual tax deductions for depreciation;
  2. The apartments are typically furnished, which brings accelerated tax depreciation claims;
  3. The apartments are self-contained, meaning multiple kitchen and bathroom assets, as well as air-conditioners and other plant and equipment assets to depreciate;
  4. Building works and assets that are demolished or removed/replaced during a renovation are eligible to be written off immediately;
  5. When purchased and operated in a commercial structure recent residential legislation changes regarding ineligibility to depreciate second-hand assets doesn’t apply.

Depreciation schedules we've completed for these types of properties recently have produced annual depreciation deductions that are on average 20% more than for a typical house of the same size and finish.

The value of a scrapping schedule for properties that are converted from standard houses should not be underestimated.  Any residual value remaining in assets that are demolished or removed during renovation are 100% tax deductible in the year they are disposed of.  This can equate to thousands and tens of thousands of dollars in additional tax deductions in the first year.

For best results that assure compliance with ATO tax legislation, investors should engage a specialist quantity surveyor to prepare a capital allowance and depreciation schedule. 

Capital Claims Tax Depreciation are quantity surveyors and investment property depreciation specialists.  For more information contact our team on 1300 922 220.


click to estimate tax depreciation deductions for rental property


About Mark Wilkins

Mark is an expert quantity surveyor, business owner, public speaker and property developer. With 20+ years experience in the construction and quantity surveying industry Mark’s specialist expertise have been sought in consultant capacity by professional bodies such as the National Institute of Accountants and the National Tax and Accountants Association, and he has presented at various property and tax seminars and expos nationwide. Mark holds a Bachelor of Construction Management from the University of Newcastle, is an affiliate member of the Australian Institute of Quantity Surveyors and a Registered Tax Agent.

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