With residential depreciation legislation changing in May last year, there has been some confusion amongst property investors and industry professionals.

Accordingly, many people have been wondering if secondhand properties can still claim tax depreciation.

Guest post – Mark Wilkins, Capital Claims

The fact is, second-hand properties built after 1987 that have had renovations completed by previous owners are generating great results for property investors.

Since the new legislation has been in place, we have only told 5 out of 100 investors that it may not be worth it due to their property being built before 1987 with no renovations.

Second-hand properties are generating great deductions from Division 43. The structural part of an investment property (eg: roof, framing, plasterboard, floorboards).

It totals thousands in tax depreciation deductions and often holds steadily over the life of the tax depreciation report which is 40 years.

You might also like:
– What tax deductions can I claim on my rental property?

– Can I still claim depreciation on my property since the new legislation passed?
– How is property depreciation calculated?

Additionally, property investors can claim tax depreciation for brand-new Division 40 assets that they have installed into their investment property (eg: carpet, blinds, stove).

For the second-hand assets already in an investment property, a value is assigned to these items. When it comes time to sell the investment property this value will reduce the property investor’s capital gains tax.

Instead of claiming for these secondhand assets at the start of the property investors journey, it’s now claimed at the end.

Need an example? Here’s a case study of a client who purchased a secondhand property

Matt and Ange purchased a 20-year-old property on the 1st of May 2018. They are planning on holding the property as a rental for the next 10 years. The previous owners completed a bathroom renovation. They also added a pergola and deck.

Matt and Ange’s tax depreciation schedule will be generated using the legislation that was announced on the 9th of May 2017. Matt and Ange over the next 10 years of owning their investment property will claim $45,107 in tax depreciation deductions. They will also claim $26,490 in CGT savings on secondhand plant and equipment items (eg: carpet, blinds, stove).

As they say “the proof is in the pudding”. Well, the proof is in this case study. Secondhand investment properties can still generate awesome results using the current legislation.

secondhand
Image c/o Capital Claims.
Mark Wilkins
Director at | markw@capitalclaims.com.au | + posts

Mark is an expert quantity surveyor, author, public speaker and property developer.  With 20+ years experience in the construction and quantity surveying industry, Mark’s specialist expertise has 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.

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