» old versus new https://www.bmtqs.com.au/bmt-insider Latest property and investor news Mon, 20 Oct 2025 22:43:26 +0000 en-US hourly 1 https://wordpress.org/?v=4.2.38 Benefits of building a new investment property https://www.bmtqs.com.au/bmt-insider/building-an-investment-property/ https://www.bmtqs.com.au/bmt-insider/building-an-investment-property/#comments Wed, 19 Feb 2020 00:00:41 +0000 https://www.bmtqs.com.au/bmt-insider/?p=38038 When you use a property for investment purposes, you want it to increase in value, or appreciate, over time. So why consider depreciation? While the value of the property hopefully rises during ownership, the building structure and assets within it will experience natural wear and tear. The Australian Taxation Office (ATO) allows owners of income-producing properties to claim depreciation deductions for this natural wear and tear. These deductions can be claimed under two categories – capital works deductions and plant and equipment depreciation.   Capital works deductions refer to the building’s structure and items considered to be permanently fixed to the property such as kitchen cupboards, doors and sinks. Residential homes in which construction commenced after 15 September 1987 are eligible to claim capital works deductions at a rate of 2.5 per cent over forty years. Plant and equipment assets are items which are easily removable from the property such as carpet, hot water systems and blinds. These assets have a limited effective life as set out by the ATO and can generally be depreciated over time. While almost all property investors will be able to claim depreciation, those who build a new property will usually claim higher deductions. Benefits of building a new investment property There are two main tax benefits to building a new investment property: Unlike an owner of second-hand real estate, an investor who builds a new property is not affected by legislation changes passed in November 2017. These changes eliminated the ability to claim a deduction for previously used plant and equipment assets found in second hand or previously owner-occupied residential investment properties. Owners of new property are still entitled to claim depreciation deductions for all eligible plant and equipment assets found within their property.   The owner of a new property is eligible to claim a deduction for the entire cost of the building structure over forty years. Owners of existing property can only claim the remaining years available.   The table below shows the first full financial year depreciation deductions and the five-year cumulative depreciation deductions for a new build and a second-hand property, both valued at $570,000. The newly built property is entitled to a first-year deduction of $10,516, while the second-hand property offers $6,738. Over the five years, the new property will allow the owner to claim $48,543 and the second hand will provide more than $28,000. While the second-hand property still offers lucrative deductions for the owner, there are clear benefits to owning a new investment property. Along with depreciation, there are several other benefits of a newly built investment property. A new home will attract an abundance of tenants seeking low maintenance, neat and tidy properties with urban convenience. As a result, the property is likely to provide consistent weekly rental returns and a low vacancy rate depending on the location and current market. When you are building an investment property from scratch, you’re also able to cater to the current market. Research what rental properties are performing well, considering the floor plan and key features that tenants are willing to pay a premium for. This could help you earn higher rental income and increase the value of the property over time. Depreciation case study: building an investment property Let’s analyse another example to highlight the importance of claiming depreciation as an investor. John builds a three-bedroom investment property for $600,000. From the property, he earns a rental income of $545 per week or a total income of $28,340 per annum. Expenses for the property such as interest, rates and management fees total $39,067. The following scenario shows John’s cash flow with and without depreciation. BMT Tax Depreciation found John $11,200 in the first financial year alone. Without depreciation he was paying an annual outlay of $6,758 per annum or $130 per week. By claiming depreciation, John reduced his outlay to $2,614 per annum or $50 per week. That’s a difference of $80 per week, or $4,160 for the first full financial year. To find out how much you could be claiming each year, Request a Quote or contact BMT on 1300 728 726 today.

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]]> https://www.bmtqs.com.au/bmt-insider/building-an-investment-property/feed/ 14 What are the depreciation differences between old and new residential properties? https://www.bmtqs.com.au/bmt-insider/what-are-the-depreciation-differences-between-old-and-new-residential-properties/ https://www.bmtqs.com.au/bmt-insider/what-are-the-depreciation-differences-between-old-and-new-residential-properties/#comments Fri, 14 Sep 2018 06:18:11 +0000 https://www.bmtqs.com.au/bmt-insider/?p=35216 Property depreciation is a non-cash tax deduction available to the owners of income producing properties. As a building gets older, items wear out – they depreciate. The Australian Taxation Office allows property owners to claim this depreciation as a tax deduction. The Australian Taxation Office (ATO) clearly defines two types of depreciation allowances available for property investors: Division 43 capital works allowance Division 40 plant and equipment depreciation The capital works allowance refers to what an investor can claim for the wear and tear that occurs to the structure of the property. This includes any structural improvements that may have been made during a renovation. Plant and equipment depreciation on the other hand, refers to the deductions an investor can claim for the wear and tear that occurs to the easily removable fixtures and fittings found within the property. Investors often wonder about the depreciation differences of older properties compared to new properties. The simple answer is that the owners of newer properties will receive higher depreciation deductions. However, investment properties both new and old can attract depreciation deductions for their owners. Capital works deductions are calculated at a rate of 2.5 per cent of the structural costs of a building and can be claimed per year for forty years. Construction costs generally increase over time, making building write-off deductions on new buildings higher. Owners of older properties can claim the residual value of the building up to forty years from construction. For example, if an investment property is five years old, the owner will have thirty five years left of capital works deductions to claim. Capital works deductions are governed by the date that construction began. Any property that was constructed after the 15th of September 1987 attracts capital works deductions. If your property was constructed prior to that date, you should still contact BMT as you can claim for any renovations that the property has undergone, including those that were carried out by previous owners.   Under new legislation passed on Wednesday 15th November 2017, owners of second-hand residential properties (where contracts exchanged after 7:30pm on the 9th of May 2017) are no longer eligible to claim depreciation on existing plant and equipment assets, such as air conditioning units, solar panels or carpet. However, owners of these properties can still claim depreciation on the plant and equipment assets they purchase for their property. There has been no change to capital works deductions, which generally account for anywhere between 85 and 90 per cent of a claim. The good news is that this means Australian property investors can still claim thousands of dollars in deductions. Additionally, if you purchased a property before 7:30pm on the 9th of May 2017, you can continue to claim as before. Find out more about the 2017 depreciation legislation changes. It’s more important than ever to work with a specialist Quantity Surveyor to ensure that all deductions are identified and claimed correctly under the new legislation. Each and every BMT Tax Depreciation Schedule will be tailored to suit an individual’s property investment scenario, ensuring that all deductions are maximised. For further information on any property investment scenario, speak with one of the expert staff at BMT Tax Depreciation on 1300 728 726.

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