The month of March ushers in the autumn season, marks the kick off to the footy season and echoes the bustling sounds of higher education institutions bubbling and frothing with hope and potential.
For 223,200 students, 2014 will be their first year of university, taking the total of university students around the country to over 1 million.
This means demand for student rental property accommodation has become quite competitive between students and families looking for well situated properties. Student accommodation is increasing in demand as Australia becomes the third most popular international student destination behind the United States and the United Kingdom.
Student accommodation is an asset class with potential, but caution is advised when considering investing in student rental property.
Here are a couple of points to consider:
- Higher management fees
- Screening for the right tenants
Many student rental property investors are often unaware they are eligible to receive significant taxation benefits.
Research has shown that nearly 80% of all property investors fail to take advantage of property depreciation, and therefore miss out on thousands of dollars in available deductions.
BMT complete tens of thousands of depreciation schedules for investment properties each year. On average, those schedules find between $5,000 and $10,000 as a first full year deduction for rental property owners.
This is no small amount, so for investors wondering what is property depreciation and how can they go about making a claim, I’ll explain.
Property depreciation is a non cash deduction the Australian Taxation Office (ATO) allows the owner/s of an investment property to claim due to the wear and tear of a building structure and its fixtures and fittings over time. It is described as a non cash deduction because the investor does not need to spend any money to be eligible to claim it.
The following scenario provides one example of an investor’s cash-flow with and without depreciation. This investor owned a property purchased at $420,000, with a rental income of $490 per week and a total income of $25,480 per annum. They had expenses for the property such as interest, rates and management fees totaling $32,000
By claiming property depreciation the owner was able to turn their negative cash-flow position into a positive one. Without depreciation they were paying out $79 per week. By taking advantage of taxation legislation and making a depreciation claim, the investor was able to turn their loss to an income of $3 per week. In total, BMT Tax Depreciation saved this investor a total of $4,255 in just one year.
I recommend that you contact a Quantity Surveyor, such as BMT Tax Depreciation, to compile a tax depreciation schedule. The Quantity Surveyor will perform a site inspection and take photos of all plant and equipment to ensure no depreciable asset is missed. They will also use their knowledge of current ATO legislation to select the best methods to calculate depreciation to maximise the claim available for the owner.
For a free over the phone assessment of the likely deductions for an investment property that is being used as student rental accommodation, please contact one of my professional staff members on 1300 728 726 or complete this form to request an estimate today.