Whether you purchase a house or a unit there are substantial residential property depreciation deductions to claim from both. However, claims can vary from each as it depends on the properties construction cost, when it was built, when the property was purchased as well as the ATO definition of if the property is considered to be brand-new or existing.
Typically, a house will comprise of bedrooms, kitchen, bathroom, living area, out-door area, garage. Within the house there will be items that are classified as ‘plant and equipment assets’ ie. carpet, blinds, stove, air conditioner.
Units will comprise of these same assets but are typically constructed in small unit complex or a large unit complex which also contain common areas.
When units are constructed there are areas within the site that are shared between the owners. For example: driveways, BBQ areas, stair wells, gymnasiums, carparks, pools, spas etc. As a property investor with a unit, you are entitled to claim the tax depreciation deduction for your portion of the common areas as well as the assets and structure of your individual unit. By claiming depreciation over the common areas this can boost your tax depreciation deductions significantly – particularly in the first few years of ownership.
You are entitled to claim the tax depreciation deduction for Division 40 – plant and equipment assets plus Division 43 – structural works, the wall of the house or unit, roof, framing, driveways, decking etc. Together Division 40 and Division 43 total thousands and can be claimable over 40 financial-years.
If you purchase an existing house or unit after May 2017, you can claim annually for any brand-new Division 40 assets that you have installed in the property. The existing plant and equipment assets will have a value placed against them which may be used to off-set potential CGT when you sell.
If you purchase a brand-new house or unit or if you purchased and rented out your property prior to the legislation changes in 2017 then you can claim for Division 40 assets as annual deductions as they are considered by the ATO to be “brand-new” plus Division 43 – structural works.
Below we take a look at our clients who recently purchased brand new units and houses and the differences that can show:
Ravi and Siv purchased a brand-new four bedroom house, two bathrooms, two family areas, out-door entertaining area. Purchase price $705,000 and settled in November 2020:
Steph purchased a brand-new 2 bedroom unit, one bathroom in a large complex where there was a gymnasium, pool, sauna, BBQ areas. Purchase price $653,000 and settled in September 2020:
The best way to ensure you maximise your tax depreciation deductions, is to order a depreciation schedule from a qualified quantity surveyor like us. A depreciation schedule can vary in price and when you are comparing make sure your tax depreciation schedule includes these features:
40 year forecasts
Our depreciation schedules will forecast a full 40 years of depreciation deductions. You will only need to make a one-off purchase for the life of the investment.
Diminishing value and prime cost
Both methods of depreciation will be reported. This allows the property investor to choose how they would like claim due to their personal circumstances and investment property strategy.
Low cost and low value pooling
We utilise both methods so property investors can claim aggressively in the earlier years of the investment when costs of holding are typically higher.
For existing properties our expert team will identify any works that have been completed over time and ensure construction, asset values and effective lives are calculated from the most recent completion or install dates maximising all potential deductions.
Inclusion of preliminary and consultant fees
Our asset values include apportionment of preliminary and consultant fees to ensure maximum, legitimate values are attributed to all assets.
Full estimation of construction and asset costs
Where full costs are not available our expert team are qualified to estimate the full costs.
Lifetime of free updates
We complete free of charge updates for our residential depreciation schedules when property investors replace or install brand-new assets and provide evidence of the costs of those brand-new assets. Not all quantity surveyors will offer this service.
Are you ready to claim your thousands? You can order your tax depreciation schedule for your house or unit here. Or if you would prefer a personalised quote plus estimate of what is available to you click here. We are also happy to have a chat call 1300 922 220.
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.View all posts by Mark Wilkins