21 Aug Are you purchasing an investment property off-the-plan?
Consider the depreciation deductions you can claim
Investors who are looking to purchase a new property often look at buying off-the plan.
Buying off-the-plan essentially means you are entering into a contract to purchase a property prior to, or during the construction phase of a property or a development.
By selecting to purchase an off-the-plan investment property, investors often find there are benefits. It can often mean that you receive the end product at a cheaper price if there has been capital growth over the construction period. Developer’s also sometimes release new products to the market in bulk at lower prices to encourage sales. In some states, there are stamp duty savings available and investor’s also have the benefit of having time on their side, enabling them to save money until settlement and while the property is being completed.
Out of all the benefits available when purchasing a property off-the-plan, the one investor’s most commonly fail to consider is what property depreciation benefits will become available.
The Australian Taxation Office (ATO) allows the owner of any income producing property to claim depreciation due to the wear and tear of the building structure and fixtures and fittings contained within the property. Depreciation is considered a non cash deduction, meaning investors do not need to spend any money to be able to claim it.
As with any pre-existing or built investment property, there are significant depreciation deductions available to the owner of a property purchased off the plan. It is important to note however that the property must be completed and be generating an income to claim the depreciation deductions available.
A completed property purchased off-the-plan will typically attract between $8,000 and $14,000 in deductions in the first years depreciation claim, so it is fair to say that the new owner can make significant savings and increase their available cash flow by claiming depreciation for the property once it is income producing.
Newly built properties constructed off-the-plan will contain new fixtures and fittings, therefore the depreciable value of these items will be higher. The owners are also eligible to claim the maximum capital works deductions for the building structure, which means more deductions are available to claim over the life of the property (forty years).
It is recommended that investors consult with their Accountant to seek advice when purchasing a property off-the-plan and also speak with a reputable Quantity Surveyor to get an estimate of the likely depreciation deductions available for the property.
A specialist Quantity Surveyor such as BMT Tax Depreciation will liaise with the Property Developer to request information about the property. This information is used to provide a detailed estimate of the depreciation deductions that will become available once the property has been completed and is income producing.
By obtaining this information, the owner will have a far more comprehensive idea of the end cost involved in holding the property. The additional cash flow created from a depreciation claim can be put towards future loan repayments or to help save for future investment property purchases.
For a detailed estimate of the depreciation available for any off-the-plan design, complete this form. Alternatively, you can speak with one of the expert staff at BMT Tax Depreciation on 1300 728 726 today.
Article provided by BMT Tax Depreciation.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Chief Executive Officer of BMT Tax Depreciation. Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia-wide service.