Many property investors choose to purchase an older property for many reasons, including its’ land content, its’ location or its’ affordability. And many are under the misconception that there are no depreciation deductions available for older properties. This misconception requires some clarification.
The current legislation in this area of property investment states that for residential properties built prior to 18 July 1985, and non-residential properties built prior to 20 July 1982, owners cannot claim a deduction for capital works.
However, this is not the case for plant and machinery. For many of our property investment clients, they are still eligible for some deductions for depreciation for older properties. In addition, many are still eligible for capital works deductions if the property owner undertook renovations or extensions after 1982 for non-residential properties and after 1985 for residential properties.
For property investors of residential properties, this means that even on a pre-1985 property there are potentially significant depreciable assets held within the building. Upgrades on air-conditioning systems, hot water systems, carpets, window treatments, in particular, are usually eligible for depreciation.
In addition, major physical upgrades such as renovated bathrooms and kitchens can also have a significant impact on a property investors’ deduction figure. This will also include painting, re-roofing and any extensions that have been built which do not qualify as a repair and/or maintenance.
Repairs and maintenance, and capital works issues, are a very confusing area for property investors, and not understanding these issues can be frustrating and lead to costly non-deductible mistakes which will not ensure that your investment is as tax effective as it can be.
You should not hesitate to seek tax advice if in doubt, and always engage the services of a Tax Accountant who is knowledgeable and experienced in the area of property tax legislation.
*Paul Baggetta, Principal of Baggetta & Co, has been a Taxation Accountant for over 32 years, a qualified Financial Planner since 1998 and in 1983 qualified as a Real Estate Licensee and holder of a Triennial Certificate operating his own real estate business for over 5 years as a second business.
November 15, 2017
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The information provided on this website, including the material and contents provided in the website publications, are informative in nature only and you should not act specifically on the basis of this information alone. It should not be used as a substitute for legal, business, accounting, tax, financial planning or other professional advice. If expert assistance is required, professional advice should be obtained.
Paul Baggetta is the Founder & Principal of Baggetta & Co. Paul Baggetta has been a Taxation Accountant since 1981, a Financial Planner since 1998, and in 1993 qualified as a Real Estate Licensee, holding a Triennial Certificate (currently not trading) and operated his own Real Estate business for property investment clients for over 5 years as a second business.
Financial planning services are provided by Paul Baggetta as an Authorised Representative (No. 261469) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. Australian Financial Services License No. 223135.
Taxation & Accounting services are provided by Paul Baggetta as a Registered Tax Agent (No.61487008) and is a Member of SMSF Association, FIPA & NTAA.