For most investors, choosing the right investment property is a big decision. There are many factors a potential investor will usually think about prior to making a purchase. Astute investors will consider the potential rental returns, the property’s location in proximity to local services, employment drivers and the likelihood of capital growth in the foreseeable future.
Unfortunately, one thing many investors still forget during the process of purchasing an investment property, is finding out how much depreciation they will they be able to claim.
According to the Managing Director of BMT Tax Depreciation, Bradley Beer, 80% of investors don’t claim the deductions available from property depreciation. Property depreciation can be worth thousands of dollars in additional cash flow for the owner of the property, so it is very important to ensure no deductions are missed.
Investors who purchase both new and older properties can take advantage of depreciation. In most cases newer properties will incur a greater deduction, as the investors will be able to claim the cost of the building structure for the entire 40 years of its depreciable life.
Before purchasing any investment property, it is always advisable to contact a specialist Quantity Surveyor such as BMT Tax Depreciation. They can provide an estimate of the likely deductions available on a perspective purchase, saving you thousands in the long run.
Real deductions, real returns – new and old properties
The table below outlines real deductions found for our clients:
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BMT Deduction Assessment |
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Purchase Price |
1st year deductions |
5 years cumulative |
Avg. annual cash return* |
|
New Unit |
$450,000 |
$12,800 |
$55,040 |
$4,073 |
|
Old Unit (1970) |
$400,000 |
$6,900 |
$28,980 |
$2,145 |
|
New 3 BR House |
$600,000 |
$11,200 |
$48,160 |
$3,564 |
|
Old 3 BR House (1970) |
$500,000 |
$6,000 |
$25,200 |
$1,865 |
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Significant Deductions are usually available despite a property’s age *(First five years, calculated on a 37% tax rate) |
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