Depreciation and off-the-plan properties

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Bradley Beer of BMT Tax Depreciation discusses why Investors who are looking to purchase a new property often look at buying off-the plan and the significant depreciation deductions available to the owner of a property purchased off-the-plan.

Investors who are looking to purchase a new property often look at buying off-the plan.

Buying off-the-plan essentially means you are entering into a contract to purchase a property prior to, or during the construction phase of a property or a development.

One big benefit of purchasing off-the-plan that investors often fail to consider is the property depreciation benefits available.

There are significant depreciation deductions available to the owner of a property purchased off-the-plan. It is important to note however that the property must be completed and be generating an income to claim depreciation deductions.

A completed property purchased off-the-plan will typically attract between $8,000 and $14,000 in depreciation deductions in the first full financial year, so it is fair to say that the new owner can make significant savings and increase their available cash flow by claiming depreciation for the property once it is income producing.

Newly built properties constructed off-the-plan will contain new fixtures and fittings*.

Therefore the depreciable value of these items will be higher. The owners are also eligible to claim the maximum capital works deductions for the building structure, which means more deductions are available to claim over the life of the property (forty years).

When it comes to the fixtures and fittings in an off-the-plan property, investors should be aware that not all assets are created equal. In most cases, those assets with a higher starting cost will generate higher depreciation deductions.

For this reason, investors may want to consider the brand and price range of assets in an off-the-plan property.

Focusing on a kitchen in an off-the-plan property, the below table illustrates how the depreciation deductions available will vary depending on the model or price range.

Source: BMT INSIDER 18 Jun 2018 https://www.bmtqs.com.au/bmt-insider/depreciation-and-off-the-plan-properties/

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.