Depreciation dilemma : Is it better to buy new or old properties?
When considering depreciation, which will gain the greatest benefit from capital allowances: new or old properties? That is the ongoing question – one that Paul Mazoletti from Napier & Blakeley aims to answer once and for all. Paul Mazoletti is a director at Napier & Blakeley, the first provider of depreciation schedules in the Australian market (since 1985).
Depreciation (capital allowances) can be a valuable tax deduction for any property investor and a great way to reduce your taxable income. However, the question of old versus new does come up a lot in discussions with investors. So, who is right and who is wrong? With effect from 9 May 2017, if you are focusing on capital allowances deductions, new property is the better way to go. We could also suggest that neither is the ‘best’ way, as there are advantages to both. However, if legislation is passed soon, the proposed changes will certainly lean you towards buying new.
The benefit of newer properties
The main benefit of buying a new investment property is that this will provide a higher total base tax deduction entitlement, when considering the combined value of fixtures and fittings the building structure’s value. Deductions through the depreciation of fixtures and fittings under Division 40 may now only be available on any new investment property asset acquisition made after 9 May 2017. Deductions through the depreciation of the building structure under Division 43 are also available on both new and older assets; we’ll explore this further later in the article. The ATO introduced capital allowances in 1985 for the residential sector, coincidentally at the same time as Napier & Blakeley opened its first office in Australia and launched its capital allowances business. Continue reading
Tax time is coming – Are you paying too much tax ?
Do you own or have you bought an investment property in the past financial year?
Or… have you recently refurbished, altered or extended your investment property in the past financial year?
Or… do you own an investment property but have never claimed depreciation in the past?
Or… own any property including commercial, retail, industrial, residential, pubs, clubs, sporting – we are experts in them all.
If your answer is yes to any of these questions then you may very well be paying too much tax on your income if you don’t claim your depreciation deductions.
Property tax allowances (commonly known as depreciation) provide an opportunity for owners of income producing property to reduce their taxable income, thus reducing the tax payable. Continue reading
