I used to advise investors to buy property built in 1986.
Because residential properties built between July 18 1985 and September 15 1987 used to attract a 4% building depreciation rate over a 25-year life span.
Everything built since then attracts a 2.5% rate over a 40-year life span.
So the net result of purchasing properties in this odd two year period was increased tax deductions – and therefore cash flow – at a faster rate.
But as of September this year, the loophole effectively closed.
That means any properties built before September 1987 incur NO building allowance.
However, if you buy a property where construction commenced in 1988, you still have 16 years to depreciate the building.
That's over 40% of the original construction cost left for you to claim – I know which one I prefer!
So if you’re in the market for an investment property - it’s worth knowing the date that construction commenced – especially if it’s around the mid to late 80s. It could make quite a difference.
The Australian Taxation Office has identified Quantity Surveyors as appropriately qualified to determine the original construction cost, where the costs are unknown.
Tyron Hyde is director of Washington Brown and has over 15 years experience in the construction and development industry. Considered one of Australia’s leading experts in property tax depreciation, Tyron regularly presents at industry conferences and events and has published numerous articles on tax depreciation and property investment. Tyron has a Bachelor in Construction Economics from University of Technology Sydney.
Click here to read more tips from Tyron!
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