Claim Depreciation on Previous Owners’ Renovations

Claim Depreciation from previous owner

You Can Claim Tax Deductions in Australia for Previous Renovations

When considering tax deductions in Australia, most investors only take their own renovations into account. It does make sense. After all, why should you be eligible to claim deductions on your investment property in Australia if you didn’t pay for the work?

Perhaps surprisingly, you can claim deductions for the previous owner’s renovations. However, there are several things you need to consider. For example, how much you can claim depends on when you purchased the property. The effects of the 2017 Budget play a role here, as what you can claim differs depending on if you made your purchase before or after the budget. Let’s look at what tax deductions in Australia you can claim in both scenarios.

You Bought Before the 2017 Budget

Things are simpler if you bought the property before the 2017 Budget. If this is the case, you can make claims under both Division 43 and Division 40 of the Income Tax Assessment Act (ITAA).

Division 43 relates to any capital works that the previous owner undertook on the property. This includes any renovations, such as the building of some extensions or remodelling a bathroom or kitchen. It also covers any work done to the building’s structure. For example, you’d be able to claim for a new roof or for some of the walls that the previous owner built.

Division 40 relates to the equipment installed in the property. Your investment property in Australia may have an air conditioning unit or some other piece of equipment Depreciation Quote Schedulethat the previous owner installed. If that’s the case, you should be able to claim for it.

The only real barrier is that you may not know the completion date for the work or the cost. Not all sellers will provide you with this information. If that’s the case, you need to employ the services of a quantity surveyor. Your surveyor will provide you with a cost estimate, which you can use when claiming tax deductions in Australia. The Australian Taxation Office (ATO) does not accept estimates from other professionals. For example, you can’t get an estimate from your accountant for the work. It has to come from a quantity surveyor.

You Bought After the 2017 Budget

This is where things get more complicated. You have to consider the extent of the renovation work, as well as whether any was carried out in the first place.

The new budget introduced the term “new residential premises” into the equation. To understand what this phrase means, we need to look at the Goods and Services Tax (GST) Act.

What Does the GST Act Say

You’ll find references to “new residential premises” in sections 40 to 75 in the GST Act. Generally, such a premises is one that has not been rented out or sold as a residential home before your purchase. This won’t usually present a problem. After all, that language basically covers new properties.

However, there’s more. The Act also defines these premises as those that have undergone “substantial renovation” work. The GST Act also provides a description for “substantial renovations”. They are any renovations through which the entire building has either been replaced or removed. As a result, the installation of a new bathroom is not considered as a substantial renovation on its own.

What Does This Mean for Me?

Depreciation CalculatorIf your investment property in Australia does not fall into the substantial renovations category, you may not be able to claim the same deductions that you could on a property built before the 2017 Budget. In particular, you won’t be able to claim Division 40 depreciation. New equipment on its own is not enough to constitute a substantial renovation.

However, this changes if the building has undergone enough renovation to become a “new residential premises”. In such cases, you can claim for both Division 43 and Division 40 work.

You’ll need the help of a quantity surveyor to work out the extent of the work undertaken on your building. Your surveyor will create a timeline for the building. This will estimate the work carried out, its cost and its extent. You can use this information to figure out if your building falls into the “new residential premises” category.

Don’t fret if it doesn’t. You can still claim for Division 43 work. Your quantity surveyor will be able to provide more exact information detailing exactly what you can claim for.

Conclusion

You’ll need the services of a quantity surveyor, regardless of when your property was built. They will be able to tell you what previous renovations you can claim for.

We can help you if you’re looking for a quantity surveyor. Contact us today to maximise the depreciation on your property’s previous owner’s renovations.

Why Buying Off-The-Plan Will Make You Money

Buying Off the Plan

Don’t Be Put Off Because You Can’t Explore The Property

There are many things you need to consider when buying an investment property in Australia. While the process may be exciting, it can also be confusing. 

One of the main choices you need to make relates to the type of property you buy. Do you purchase an older property that has a track record of generating income, or a brand new property that may stand a better chance of meeting the demands of tenants?

What if we told you there’s another way? Instead of buying a property that already exists, you can buy one that’s under construction. This idea may stray away from the property investment basics that you’ve read about while working out the complexities of investing in property for beginners. However, we can offer six reasons for why an off-the-plan property could prove to be a wise investment.

Reason #1 – Earn Early Capital Growth

What’s one of the first investment property tips for beginners that you’ve heard? It’s probably to buy low now so you can make a profit later. Buying an off-the-plan property allows you to do just that. So how does it work? It’s simple. You pay a deposit to the developer, and this secures your ownership of the property.

However, the construction settlement date may be several years in the future. As a result, you can earn capital growth for the home, even during the period prior to construction. You won’t even have paid the full price of the property before it starts making money for you. Depreciation Calculator

Reason #2 – Stamp Duty Savings

Buying an investment property in Australia comes with a lot of added fees. The largest of these is often stamp duty. In most states, you will have to pay thousands of dollars in stamp duty before you can take ownership of the property. Take Victoria as an example. For a property worth $500,000, you’ll have to pay almost $20,000 in stamp duty.

Buying off-the-plan can help to avoid this major fee. Most states don’t charge stamp duty on properties that don’t exist yet, which means you make thousands of dollars in savings from the beginning.

Reason #3 – Extra Saving Time

You only have to put down an initial deposit when you buy an off-the-plan property. As we mentioned before, you may have to wait for a couple of years before construction finishes.

This gives you plenty of time to save some money. Once construction ends, you could have thousands of dollars that you wouldn’t have had if you’d bought an existing house. You can then put this money toward your home loan, reducing the principal so that you pay less interest on the loan over time.

Reason #4 – You Can Claim Depreciation

Depreciation Quote ScheduleYou may be planning on renting out your off-the-plan property when construction ends. If so, you may be able to claim thousands of dollars in tax deductions in Australia on the property.

Make time to create a depreciation schedule with the help of a quantity surveyor. This will highlight all the things that you can claim as depreciation upon completion of the property. This may include the new furniture and fixtures that you add to the property before making it available to tenants. The higher the depreciation, the lower your holding costs.

Reason #5 – You Can Pick the Perfect Plot

Showing early interest in a new development comes with its own advantages. In addition to benefitting from the lower prices that developers often charge to their early investors, you also get to choose from the best plots of land.

This will benefit you monetarily when construction ends. Getting in early means you can pick the property that will have the best views or offers the amenities that your tenants will want. As a result, you can charge higher rents, so your property generates more income.

Reason #6 – Reductions in Other Costs

A brand new property does not come with the maintenance needs of an old property. That should go without saying. You won’t have to earmark thousands of dollars for repairs, as the property should be good to go from the moment construction ends.

However, did you know that off-the-plan properties could save you money in other areas? It’s all thanks to recent changes in the Australian Building Code. New properties must now meet several energy efficiency criteria. This means the cost of utilities falls, which benefits both you and your tenants.

The Final Word

Buying off-the-plan may seem scary at first. After all, you don’t have the opportunity to explore the property before you buy it.

However, it opens the door to savings that you wouldn’t have access to with an existing property. To find out more about buying an off-the-plan investment property in Australia, contact Washington Brown today.