Save
Growing trend with property investors put tax deductions at risk
New market research indicates that Australian property investors are compromising their access to tax deductions, sometimes in the order of thousands of dollars.
Growing trend with property investors put tax deductions at risk
New market research indicates that Australian property investors are compromising their access to tax deductions, sometimes in the order of thousands of dollars.
Data from BMT Tax Depreciation for the 2018-19 financial year to date shows that over one in four people had lived in their property prior to renting it out. This represents a jump of about 2.3 per cent over the previous financial year.
New laws may be confusing investors, according to BMT chief executive Bradley Beer.
According to rules introduced in 2017, investors are not permitted deductions for the decline in value of previously used plant and equipment in rental premises used for residential accommodation. Therefore, investors are potentially risking tax deductions by living in and installing new assets.
“Our data suggests that a growing number of people are opting to live in a property while renovating and before renting it out. If they choose to make these types of additions to their property during this time, they could lose out on thousands of dollars of tax deductions,” said Mr Beer.
Have a good reason
Unless they have a good reason, Mr Beer said that investors who are planning on installing new plant and equipment assets should make these additions after they move out of the property and it has been listed for rent.
Capital works deductions for structural items such as new walls, kitchen cupboards, toilets and roof tiles are unaffected by the legislation changes and can be claimed by owners of income-producing investment properties.
“The new legislation does not affect buyers of new properties, so these properties typically hold the most lucrative value for investors from a tax perspective,” Mr Beer said.
“This fact, and the new stock that has come on the market in recent years, may be contributing to the increased demand for new investment properties over secondhand properties.”
Tax relief still on offer
Mr Beer believes there are still lucrative tax deductions on offer for most investment properties.
“We found an average of $8,212 in deductions in the [2017-18] financial year for all residential investment properties,” he said.
“Tax depreciation can dramatically increase the cash flow from an investment property, so savvy investors should look to attain a basic understanding of the rules and assemble a strong team of advisers to help take advantage of them.”
RELATED ARTICLES
Tax saving
Navigating tax laws for capital gains in 2023
The landscape of Australian tax laws surrounding capital gains is ever-changing, with 2023 being no exception. Read more
Tax saving
What you need to know about the tax implications of crypto
One million Aussies are now invested in crypto, but many have not thought about how these investments will affect them at tax time. Read more
Tax saving
Welfare overhaul could give recipients a leg-up
Australia’s Centrelink recipients who’ve been doing it tough are in for a potentially easier time if the federal government pursues ambitious reforms that could provide sturdier safety nets. Read more
Tax saving
Students should think twice before tapping into their super
Former students might want to think carefully before they look to take advantage of the federal government’s biggest first home buyer incentive. Read more
Tax saving
Advocates call for an end to tax cuts
Social services sector advocates have warned that further tax cuts may make solving Australia’s biggest challenges much harder. Read more
Tax saving
ATO and AUSTRAC may gain new phone-tapping powers
A proposed update to electronic surveillance legislation could see the ATO armed with new powers that would allow the agency to bug phones and intercept online communications. Read more
Tax saving
Over 2m Aussies asked the TPB for help during the last year
As the economy recovers, Australia’s tax regulator says it’s planning to put unregistered practitioners under the microscope. Read more
Tax saving
Will you pay higher taxes due to bracket creep?
Bracket creep will see Australians paying more tax on average, unless further cuts are introduced in the future. Read more
Tax saving
Navigating tax laws for capital gains in 2023
The landscape of Australian tax laws surrounding capital gains is ever-changing, with 2023 being no exception. Read more
Tax saving
What you need to know about the tax implications of crypto
One million Aussies are now invested in crypto, but many have not thought about how these investments will affect them at tax time. Read more
Tax saving
Welfare overhaul could give recipients a leg-up
Australia’s Centrelink recipients who’ve been doing it tough are in for a potentially easier time if the federal government pursues ambitious reforms that could provide sturdier safety nets. Read more
Tax saving
Students should think twice before tapping into their super
Former students might want to think carefully before they look to take advantage of the federal government’s biggest first home buyer incentive. Read more
Tax saving
Advocates call for an end to tax cuts
Social services sector advocates have warned that further tax cuts may make solving Australia’s biggest challenges much harder. Read more
Tax saving
ATO and AUSTRAC may gain new phone-tapping powers
A proposed update to electronic surveillance legislation could see the ATO armed with new powers that would allow the agency to bug phones and intercept online communications. Read more
Tax saving
Over 2m Aussies asked the TPB for help during the last year
As the economy recovers, Australia’s tax regulator says it’s planning to put unregistered practitioners under the microscope. Read more
Tax saving
Will you pay higher taxes due to bracket creep?
Bracket creep will see Australians paying more tax on average, unless further cuts are introduced in the future. Read more
