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‘Live in’ renovators at risk of missing out on tax deductions

By Sasha Karen 09 April 2019 | 1 minute read

Investors who choose to live in an investment property before renting it out could mean thousands of Australians are putting potential “lucrative” tax deductions at risk, according to a depreciation specialist.

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With over one in four investors living in a property before renting it out over the 2018-19 financial year to date according to data from BMT Tax Depreciation, its CEO Bradley Beer has said these people could be at risk of missing out on deductions due to changes in tax depreciation laws.

“Owners of income-producing investment properties can claim lucrative tax deductions for ‘plant and equipment’ items in a property such as carpet or air conditioning units. However, under the new laws, if an investor is living in a property at the time the assets are installed, the items will be considered previously used and cannot be claimed,” Mr Beer said.

“Our data suggests that a growing number of people are opting to live in a property while renovating and before renting it out.

“If they choose to make these types of additions to their property during this time, they could lose out on thousands of dollars of tax deductions.”


Instead, Mr Beer said these investors living in their investment properties who are considering installing new plant and equipment assets should do so only after they have moved out of the property and listed it for rent.

The changes to tax laws, Mr Beer said, do not apply to structural items like new walls, kitchen cupboards, toilets and roof tiles, and can be claimed by owners of income-producing investment properties.

However, buyers of new properties are unaffected by the legislation and as such hold higher tax value for investors.

“This fact, and the new stock that has come on the market in recent years, may be contributing to the increased demand for new investment properties over secondhand properties,” Mr Beer said.

“Tax depreciation can dramatically increase the cash flow from an investment property, so savvy investors should look to attain a basic understanding of the rules and assemble a strong team of advisers to help take advantage of them.”



Risk is defined as the possibility of an investment having a different outcome from its expected gains or returns.

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‘Live in’ renovators at risk of missing out on tax deductions
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