Eco-friendly upgrades on properties can potentially help investors not only get green credentials but also boost rent and minimise tax burden.
MCG Quantity Surveyors managing director Mike Mortlock said smart landlords can reap financial rewards by going green.
“The old trope is that you can either be a raging capitalist investor or an eco-warrior, but not both — I beg to differ because there are ways improve your investment’s green credentials while boosting the rent and minimising your tax burden through cost write-offs and depreciation benefits,” he said.
The conversation about climate change spurred the increased appeal of eco-friendly properties and Mr Mortlock believes this will create a change in the preferences of many homebuyers and tenants.
“We have reached a point where the public values eco-friendly moves designed to help address climate action,” he said.
“This extends to housing too with energy-rated design part and parcel of most building approvals.”
Here are five areas where investors can consider eco-friendly upgrades that are most likely to have a positive financial impact:
1. Heating and cooling systems
One of the biggest environmental issues in residential properties are the heating and cooling systems.
Mr Mortlock said air-conditioning systems and high-energy heaters, while effective, are hurting the planet due to major carbon emissions.
“But there are moves you can make that will keep the environment happy. Insulation to roof and wall cavities is an excellent start,” he said.
The cost of blanketing a ceiling would be around $2,000 but this can be claimed as a capital works deduction.
A ceiling fan is also an option. It costs under $300, and its outlay is fully depreciable on tax returns.
“Then there’s window film which can keep out the heat in summer. A window tint will set you back between $50 and $100 per square metre in most instances and is a capital works deduction.”
2. Energy sources
Mr Mortlock said there are ways to create independent energy sources that might not be necessarily cheap but could be worth it.
“Solar systems and battery storage are easy retrofits — a decent system installed will cost between $5,000 and $15,000,” he said.
“Installing solar allows you to depreciate its cost by 10% per year under the diminishing value (DV) method.”
For those with acreage investment, a wind turbine could be an option. A $2,000 wind turbine can already generate formidable power.
“Depreciation benefits based on an effective life of 20 years gives you another 10% per year via the DV method,” Mr Mortlock said.
3. Water Collection
Water tanks can be installed and plumbed into a home for well under $10,000.
“As of July 2019, rainwater tanks were listed by the Australian Tax Office as a plant and equipment item — this means that rather than a 2.5% deduction, you get a whopping 40% rate of claim.”
On top of this, using a water tank for toilets and washing machines help tenants by preventing excess water charges, which means a potential for a rent boost.
4. Future-proofing for electric vehicles
For tenants and homebuyers, particularly in the inner-city regions, garages with car charges are becoming appealing as the use of electric vehicles becomes popular.
With this, Mr Mortlock believes domestic car chargers, which cost around $750 to $1,500, would soon become a must-have.
“Vehicle chargers will net you a 20% depreciation rate each year,” he said.
5. Landscaping
Another eco-friendly upgrade that makes sense involves landscaping with mulching and natives.
Mr Mortlock said natives are low maintenance plants that do not consume much water and can help contribute to converting back carbon emissions.
“A thoughtfully designed landscape might set you back $10,000 to $20,000, but you can claim some of it back through your tax return,” he said.
And while investors can claim any deductions on things such as plants and turf, they can take advantage of the deductibility of some works like retaining walls, paving, concreting, and fencing.
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Photo by moerschy from Pixabay.
