Depreciation for older property

Hi all,

House is 20 years young but well maintained. How is deprecation calculated if bought today. Ie 20 years depreciation on a valuation at today’s prices?
Thanks

 

The cost to build the house (excluding Assets) 20 years needs to be calculated. You then claim that at 2.5% per annum. If the house was built 20 years ago, there is 20 years left to claim - 2.5% x 40 = 100%.
Scott

 

And some more recent renovations or structural additions or renvations could add to this. There may also be CGT loss benefits for plant items which cant now be claimed but they can rack up a CGT loss in time. I always give same advice. Until a QS tells you to not get a report, you get a report.

 

Thanks guys

 

Some great advice given above.

As a QS myself I always recommend getting a report (bar a few exceptions).

So just to summarise what’s been said already...

You can claim the original construction costs at 2.5% per year - until its 40years old.

This includes all hard landscaping as well.

So let’s say it’s a 200sqm home built in 2001.
The sqm rate back then was around $1,000/sqm

That’s $200,000 @ 2.5% = $5,000/yr in deductions

Then your original driveway, fencing, etc cost another $10,000

At 2.5% that’s another $250/yr in deductions

Total: 10,250/yr in deductions

That’s all the original stuff.

Then you have renovations and improvements.
-painting
-new kitchen
-tapware
-locks
-security screens
-sheds

...The list can go on and on

All improvements are also claimable at 2.5%pa

Capital Losses:
Paul mentioned potential Capital Loss items earlier.

That’s basically a list the QS does of all the ‘plant and equipment’ assets in and around your property that can’t be deducted in a depreciation report.

Even though you can’t claim tax deductions for the current market value of your appliances, carpet, air con, etc - you still paid good money for them in the property purchase.

So, you can claim their market value as a capital gains loss if / when you sell in the future.

But again, the QS has to put that schedule together for you.

Hope that helps and if you have any more q’s Just ask!

Will

 

Thanks Will. I think let’s chat offline I think this changes the argument of buying a 2 year old property vs 10-15 year old property if can do other adjustments to the older property

 

Never buy a property for the depreciation tax benefits alone. Those that do typically buy new apartments and thats not wise at times - like now with oversupply and some quality issues. The land elements play a part in capital appreciation too. But then land tax plays a greater role. A freestanding villa that is two-three years old of good quality will have deductions far above a renovated 65 year old property. However a 65+ year old propertyin the right area may be a far better investmnet. Like cashflows it all lays a part. The depreciation deductions is like a teasopoon of sugar that can take a cashflow negative / neutral and make it cashflow positive when the "free"tax refund is allowed.

Our property tax estimator tool helps with the example if you play with the numbers with deprciation.

But also bear in mind every $ of capuital allowances you claim is later clawed back when (if) you sell. Each dollar claimed erodes the costbase. So after 10 years the costbase will be lower. More profit. More CGT. However 50% of it will be reduced. It does bring forward tax benefits also..

 

Cheers Paul. Yes the depn is the sweeter not the main sim for buying but helps compare benefits of older vs newer.