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New legislation helps Developers target investors

Estimates could boost new project sales

Most Developers are familiar with the need to incorporate a variety of tools when selling a new project to property investors. One of these valuable tools includes depreciation estimates.

The expert team at BMT Tax Depreciation help Developers, Builders and Project Marketers to sell their development projects faster to investors who may not realise the depreciation deductions available to them.

While there have been some recent changes to depreciation legislation, this only affects plant and equipment assets found in second-hand residential properties. It is important for Developers and Project Marketers to take note of the following points:

  • Investors can still depreciate new plant and equipment assets within a new property
  • Developers who build a new residential property will have a six-month grace period in which they can rent out the property (in a situation where they can’t sell it straight away) and will continue to be able to sell the property to an investor with full depreciation entitlements

The result of this new legislation, which came into effect from the 1st of July 2017, is that new properties will have higher depreciation deductions than second-hand properties available. Given this, property investors may start to target newer properties.

A tax depreciation estimate shows potential buyers the depreciation deductions they may be entitled to claim for any property they are considering purchasing within a particular development. This information can help the investor when crunching their numbers to make purchase decisions and ultimately make owning the property more financially viable.

The table featured provides an estimate of the likely deductions for a new residential unit and a two year old residential unit purchased for $700,000 after 7:30pm on the 9th of May 2017.

New residential unit,
purchase price
Likely deductions after 9th May 2017
First full year $14,600
Five year total $59,800
Two year old residential unit, purchase price $700,000
Likely deductions after 9th May 2017
First full year $8,200
Five year total $41,000

Assumptions and disclaimer

The depreciation deductions in this example have been calculated using the diminishing value method.

As the example shows, the owner of the new residential unit is entitled to $14,600 in deductions in the first full financial year alone and the owner of the two year old unit can claim $8,200 in deductions in the first full financial year.

These estimates can be used by the property investor to help calculate their after-tax holding costs.

A BMT Tax Depreciation Estimate can be completed at any stage of a property’s development (including before construction commences) and can be provided for a wide range of developments including commercial, retail, industrial, manufacturing and residential projects.

Developers can arrange a free estimate of the likely depreciation deductions available by visiting our developer estimate page.