One of the most common questions I have been asked over the years is whether it is worthwhile to claim depreciation on older properties. The answer is emphatically yes! Here’s why.
Asking if older properties quality for tax depreciation benefits is a common question because many property investors assume that tax depreciation only applies to new properties.
However, the reality is that regardless of the age of a property, there will always be tax deductions you can claim on a property regardless of its age.
These deductions may include building improvements and the value of plant and equipment associated with the property.
Many property investors, for example, are surprised to learn that even old carpets and curtains can be claimed for tax depreciation purposes.
The question of whether older properties qualify for tax deprecation benefits is a particularly relevant issue as a growing number of investors are now buying older properties as part of a strategy of building a successful portfolio.
Astute property investors understand that older properties can achieve high levels of capital growth because of their high land content.
DEPPRO is finding that many of these investors are buying older properties and undertaking cosmetic renovations to boost rental returns, especially in the booming property markets of Sydney and Melbourne.
If you are planning to buy an older investment property for renovation purposes, it is important to claim their full tax benefits relating to home renovations.
Unfortunately, many investors who are renovating older properties throw out items without understanding that they may claim tax benefits on these materials at 100 per cent of its written down value in the year of disposal.
A typical amount spent on a home renovation can range from $30,000 to $60,000 for a basic refurbishment. However, an investor can qualify for both plant and capital works allowance as a tax deduction and the residual write-off of the disposed item through tax depreciation benefits.
To qualify for these tax generous benefits, investors have to undertake a depreciation schedule for the property as near as to the date of purchase as possible.
Paul Bennion is the managing director of DEPPRO tax depreciation specialists.
DEPPRO Pty Ltd is Australia’s leading property depreciation company, specialising solely in the preparation of tax depreciation reports for residential, commercial, industrial and leisure investment properties.