Depreciation schedules shed light on property investment

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A recently released report by BMT Tax Depreciation analysed depreciation data and its relationship to investment trends in Australia.

According to their findings, the majority of investors who contacted the company to arrange a depreciation schedule during the 2015-2016 financial year (83.64%) ordered a report for one property. “This suggests many Australians are successfully taking their first steps in entering the property market, but the vast majority are buying one property,” said Chief Executive Officer Bradley Beer.

The data further suggests that about 17.2% of investors are expanding their property portfolios to two or more properties. “In fact 11.35 per cent of schedule requests came from owners with two properties, 3.85 per cent of schedule requests were from owners with three or four properties and less than 2 per cent own five or more properties,” said Beer.

During the 2015-2016 financial year, investors overwhelmingly favoured houses, with over half of the schedules prepared going to houses. Units were the second most popular investment choice (42%) Meanwhile, only 6.08% of investors chose townhouses and 1.75% chose duplexes. 

BMT Tax Depreciation also reviewed the age of the properties they prepared residential depreciation schedules for during the previous financial year. “It was interesting to note that investors were fairly evenly split between purchasing brand new, recently built properties constructed between 2012 and 2015, properties that are around fifteen years old and those who own older properties constructed prior to 2000 and 1987,” Beer said.

The following table highlights the percentage of residential property investors who requested schedules based on the specified construction dates:

Age of residential properties selected: 2015-2016 financial year

Description: Construction dates: Percentage of total:  Average first full year deduction
Old Pre 1987 22.3% $4,899
Pre 2000 1987 - 2000 16.9% $7,543
Up to 15 years old 2000 - end of 2012 26% $11,303
Fairly new 2012 - 2015 13.3% $12,316
Brand new  Built after 1/3/2015 21.5% $12,680

As is made clear by the table of data, even the owner of a property constructed before 1987 can receive an average depreciation deduction of $4,899 in the first full financial year alone. While owners of brand-new properties will receive higher depreciation deductions ($12,680 in the first full financial year), it’s always worthwhile to ask a specialist quantity surveyor what can be claimed, regardless of the age of the property. 

Owners of newly-constructed properties are entitled to claim capital works deductions for the full 40 years. Meanwhile, owners of older properties where construction commenced after 15 September 1987 can claim capital works deductions each year for the remaining 40 years.

Although the Australian Taxation Office places restrictions on capital works deductions based on the construction commencement date of the property, no such restrictions exist for plant and equipment assets. “Their value is determined by the condition, age and quality of each asset. A fair value is determined for these assets and the effective life will start from the date of settlement,” said Beer. 
Source for table: BMT

Related stories:
Can I Claim Depreciation On My Very Old Property 
How Property Investors Can Reduce The Taxation Burden 


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