» apartment

What is common property in strata title?

BMT team — Tue, 03 Dec 2019 21:56:57 +0000

What is common property in strata title, and can you claim deductions for it? Common property assets entitle investors to significant depreciation deductions however many property owners fail to maximise their claims. All strata title properties contain different assets and have unique ownership arrangements, so it’s important the depreciation deductions get apportioned correctly. In this article we will look at: What is common property in strata title? How to calculate an investor’s entitlement to common property Depreciation deductions for common property Common property case study What is common property in strata title? A strata title is used when investors own part of a property usually called a ‘lot’. This can be a unit, duplex or townhouse complex where ownership of common property including driveways, foyers and gardens is shared by all property owners. Common property assets can include items like air conditioners, fire safety equipment, lifts, lights and garbage bins. How to calculate an investor’s entitlement to common property An investor’s entitlement to shared assets within strata property is calculated based on their percentage of ownership. Experts such as BMT Tax Depreciation can review the property’s entitlements within the Strata Plan, Building Unit Plans and Plan of Subdivision to determine the exact percentage of ownership. This percentage ensures every depreciation deduction is captured correctly. Depreciation deductions for common property Common property depreciates in the same way as any other part of the property. Plant and equipment assets in common property will depreciate according to their effective lives, which are determined by the Australian Taxation Office. Capital works allowance relates to the structural portion of common property and depreciates over 40 years. This rate typically depends on the property’s construction date and the building’s purpose. Shared assets also often fall into a low-value pool or will qualify for an immediate write-off. This allows Quantity Surveyors to apply accelerated depreciation rates to most assets found in common areas. If an owner’s interest in a common property asset is less than $1,000, the asset can be pooled and claimed at a rate of 18.75 per cent in the year of purchase and 37.5 per cent each year thereafter. If an owner’s interest in an asset is less than $300, the asset qualifies for an immediate write-off. Common property case study The owner of a $595,000 two-bedroom, two-bathroom apartment can claim common property assets like lifts, ventilation fans, carpet, intercom system assets and air conditioning. The table below highlights the apportioned value of each asset, the depreciation rates and the first and second year deductions available. The owner’s portion of the carpet and intercom system each have a value less than $1,000 so they can qualify for a low-value pool with accelerated depreciation. The air conditioning has a calculated value less than $300, so the investor can claim the full amount in the first financial year. In this scenario, the investor would be able to claim more than $1,200 in depreciation deductions from common property assets in the first and second year. Given there are likely to be more common property assets, like garbage bins, hot water systems and gym facilities, the investor could be entitled to thousands of dollars more. To find out more about how depreciation can help you if you own a unit, apartment or townhouse Request a Quote or contact BMT on 1300 728 726. Investors also enjoy reading: Steps to expand your property portfolio When do you pay capital gains tax on investment property? Home and contents insurance you need for your investment property

The post What is common property in strata title? appeared first on .

Why savvy investors love these 5 properties from The Block

BMT team — Thu, 07 Nov 2019 00:32:58 +0000

Each year The Block contestants battle against time to complete lavish renovations before auction day. While time management, styling and functionality all play a part in determining who wins the TV series, there’s another hidden feature that attracts savvy investors to the high-end properties. It’s called depreciation. The Australian Taxation Office allows owners of income producing properties to claim depreciation deductions for the wear and tear that occurs as a building gets older and items within it wear out. Each property is unique and holds different depreciable value, sometimes in the millions. BMT Tax Depreciation has worked with The Block to provide depreciation assessments for more than ten years. Now, we’re revealing the top properties with the highest depreciation deductions available from the past five seasons. 1. Jesse and Mel – 2019 Jesse and Mel’s property on this year’s season of The Block holds nearly $3.68 million in tax deductions for the future buyer should they decide to rent the property out. In the first year of ownership, an investor could claim more than $138,000 worth of depreciation deductions. This attribute could increase the price that property investors are willing to pay for the property and give the pair an edge during the final auction. While Jesse and Mel’s property holds the most total deductions, Mitch and Mark ($3.65 million) and Andy and Deb ($3.63 million) are hot on their heels. 2. Kerrie and Spence – 2018 Barossa couple Kerrie and Spence were first up on auction day last year and started the night with a spectacular result. The couple’s 2018 apartment sold for $2.85 million, $415,000 over reserve. The property was also shown to hold over $3 million in tax deductions for future investors, with $135,132 in depreciation deductions in the first year alone. Outstandingly, Kerrie and Spence’s property had $100,000 more in deductions than their closest rival. 3. Hannah and Clint – 2017 You may be more familiar with fan favourites Elyse and Josh, who famously won the season when they sold their property to comedian Dave Hughes, but contestants Hannah and Clint stole the attention of investors. Hannah and Clint’s property had a first-year deduction estimated to be $82,304 and a total average deduction of $2,175,149. The Townsville couple took home $95,000 after their house sold for $2.61 million. 4. Kim and Chris – 2016 While Will and Karlie took out the 2016 season, pocketing a whopping $815,000, it was Kim and Chris who built the best investment property. Kim and Chris’s penthouse apartment had the highest amount of depreciation deductions available, with a first year deduction estimated to be at $87,470 and a total deduction estimated to be at $2,448,042. Overall, BMT analysis found that investors could claim an average of over $2.2 million in depreciation deductions for each apartment on the 2016 season. 5. Dean and Shay – 2015 Who could forget Dean and Shay’s incredible penthouse apartment? Taking out the top spot on The Blocktagon season, the Newcastle couple’s penthouse sold for $2.3 million, $655,000 above its reserve price. Their luxury apartment also had significant depreciation deductions on offer for investors. BMT Tax Depreciation estimated Dean and Shay’s penthouse apartment to have a minimum of $62,735 in first year depreciation deductions and $1,621,688 over the specified lifetime of the property. Out of all apartments on the 2015 series, this was the highest amount of depreciation deductions available to investors. Do you love watching The Block? You might enjoy reading: Are home renovations tax deductible? What’s the difference between a cosmetic and substantial renovation? Lucrative assets to install when renovating

The post Why savvy investors love these 5 properties from The Block appeared first on .

Does size really matter?

BMT team — Thu, 25 Feb 2016 00:14:47 +0000

Apartment size restrictions and property depreciation Continued demand for housing in Australian capital cities has created debate in the past year over the minimum size requirements for apartments. In New South Wales and Victoria in particular there has been much discussion over whether to mandate a minimum size for apartments, while in Queensland there is currently no intention to mandate a minimum size. As the population of Australian cities grow, there is a need for an increased number of dwellings which take up smaller amounts of space, particularly in metropolitan areas. This trend indicates that further legislative change is likely, to manage the demand for these dwellings. In New South Wales, new one bedroom apartments must already meet a minimum size restriction of sixty square metres, while new studio apartments are restricted to thirty five square metres. However, a number of older, pre-existing apartments were built prior to building codes being introduced through State Environmental Planning Policies and local council policy. Therefore a number of apartments exist which are smaller than current regulations. Additionally, local councils are able to enforce their own size restrictions, although these are unable to be under the minimum apartment size enforced by their respective state government. Lenders also impose restrictions when providing finance for investors considering purchasing smaller units and apartments. Each individual lender has their own guidelines, but as a general rule most require a minimum living area of between forty and fifty square metres. Some lenders will additionally restrict their exposure to certain developments, only providing funding to buyers for a specified number of properties purchased below allocated sizes. Lending requirements such as the Loan to Value Ratio (LVR) may also change based on the size of a unit. This may mean investors who plan to purchase smaller properties may need a greater deposit. Despite the hesitations some lenders may have in providing finance for smaller apartment dwellings, there are benefits for buyers considering smaller properties. Investors who purchase smaller apartments will often secure them at lower prices, yet can still achieve excellent rental returns that result in increased yields. As investors frequently question the benefits of purchasing properties of different sizes, this can often lead to them asking staff at BMT Tax Depreciation ‘how will the size of an investment property affect the depreciation deductions that can be claimed?’ To examine this question and provide an answer, we’ve completed a comparison of the depreciation deductions which would become available to an investor purchaser for a variety of apartment sizes in different locations around Australia. All of the properties compared in this study have a purchase value of $450,000. The following table summarises our findings. Unit size and property depreciation Property type Property location First year deductions First five year deductions 44 sqm Studio apartment Ultimo, NSW $7,000 – $9,000 $36,000 – $39,000 49 sqm Studio apartment South Yarra, VIC $8,000 – $10,000 $37,000 – $39,000 70 sqm One bedroom apartment Braddon, ACT $6,000 -$8,000 $35,000 – $38,000 95 sqm Two bedroom apartment Darwin, NT $10,000 – $12,000 $48,000 – $51,000 132 sqm Three bedroom apartment Runaway Bay, QLD $14,000 – $16,000 $55,000 – $60,000 The depreciation deductions in this case study have been calculated using the diminishing value method of depreciation. As the table demonstrates, the size of each apartment will impact the depreciation deductions an investor can claim. However, it is important to note that while an apartment’s size may affect the depreciation deductions which can be claimed by a property investor, it is not the only factor determining the total deductions available. A property’s size will generally only influence the capital works deductions an investor can claim for the structural components of the property. However, a smaller size apartment can restrict the plant and equipment items found within the apartment itself, for example the amount of carpets used will be smaller and the number of light fittings required will be less due to fewer room numbers. Specialist Quantity Surveyors will also complete a full site inspection of the property to include all of the depreciable plant and equipment items an investor can claim. They will take into consideration the quality of finish and the age of the items contained within the property when calculating depreciation deductions. Investors can also claim depreciation for common property items such as pools, tennis courts, gyms and lifts. However, smaller units in an apartment complex may have less percentage of ownership over common property areas than larger units. Ultimately, the most important thing investors should remember is no matter what property they are considering purchasing, it is best to seek professional advice prior to making a purchase.

The post Does size really matter? appeared first on .