Many property investors mistakenly believe that tax depreciation benefits apply only new properties.
Blogger: Paul Bennion, Managing Director, DEPPRO tax depreciation specialists
While investors can claim maximum depreciation for new properties, older properties can also deliver significant tax depreciation benefits.
This is a topical issue because of the growing number of properties buying older properties for renovations purposes throughout Australia.
Falling interest rates and improving confidence in the national real estate market have seen a flurry of investors snapping up ‘do-ups’.
As part of this trend, DEPPRO has recorded very strong activity from property investors seeking tax depreciation reports after purchasing homes since interest rates fell to record low levels.
Typically, investors are buying older properties and undertaking renovations to kitchens, bathrooms with a view to either quickly sell the property for profit or to make the property more attractive to tenants and boost the rental returns.
These investors are capitalizing on falling interest rates which has made home renovations more affordable. At the same time they boost their rental returns through targeted home improvements.
However, many investors embarking on renovation projects were missing out on valuable tax benefits.
Property investors throw out items without understanding they may claim tax benefits on these materials at 100 per cent of its written down value in the year of disposal.
An investor can qualify for both plant and capital works allowance as a tax deduction and the residual write-off of the disposed item through tax depreciation benefits.
These depreciation benefits can amount to several thousand dollars a year even for older properties.
However, to qualify for these tax benefits, investors have to undertake a depreciation schedule for the property as near as to the date of purchase as possible.
They also need to engage the services a tax depreciation company that is fully compliant with the requirements set down by ATO so they can lawfully claim these tax depreciation benefits.