From a depreciation perspective, new and established properties are treated differently.
New properties often have clearer depreciation opportunities because the investor may be the first owner of the plant and equipment. They may also have full capital works deductions available if the building is new and income-producing.
New property may include:
- New building structure
- New appliances
- New flooring
- New blinds
- New air conditioning
- New common property
- Builder cost information
- Clearer depreciation start date
Established properties can still be valuable from a depreciation perspective, but the rules need to be reviewed carefully.Established property may include:
- Capital works deductions
- Previous owner renovations
- Extensions
- Common property
- New assets installed after settlement
- Renovation opportunities
- CGT cost base considerations
The 9 May 2017 residential depreciation changes mean investors generally need to be careful claiming second-hand plant and equipment in residential rental properties. However, this does not mean established properties have no depreciation.Depreciation should not be the only reason to buy a property. Location, growth potential, rental demand, cash flow, debt, tax position and long-term strategy all matter.
Koste.ai can help investors compare the likely depreciation profile of different property types before making a decision.
Frequently Asked Questions
Can I claim plant and equipment on an established property?
For residential properties purchased after 9 May 2017, second-hand plant and equipment is generally excluded. However, new assets you install after settlement can still be claimed.
Is capital works depreciation available on older properties?
Capital works deductions are available for construction completed after 18 July 1985. Some older properties have been renovated since then, which may still attract capital works deductions.
Do new properties have better depreciation than established ones?
New properties often have stronger early depreciation because plant and equipment is new and full capital works are available. However, established properties can still provide meaningful deductions depending on their history.
Should depreciation be my main reason for buying a property?
No. Depreciation should be considered as part of the overall investment analysis, alongside location, growth potential, rental demand and financing. Buying purely for depreciation can lead to poor investment decisions.
Can I get a depreciation estimate before I buy?
Yes. A preliminary depreciation estimate can help you compare the likely tax benefits of different properties before making a purchase decision.
Written by Koste Team · Koste Chartered Quantity Surveyors · AIQS Member · RICS Member · TPB Registered · 1300 669 400 · info@koste.ai