Claiming Depreciation On New Build Homes

The choice to purchase an investment property can be the perfect way to increase cashflow and secure your financial future. In today’s blog, the Aston Homes team explore depreciation tax in reference to newly built homes. How can you best ensure your new-build becomes a profitable investment – and you make some great savings come tax time? Read on!

What is depreciation?

In a nutshell, depreciation is the value  that items decreases over time when used. In relation to investment properties, as a building ages, so too do its fittings. The Australian Taxation Office (ATO) recognises this by allowing owners of investment properties to claim a depreciation tax break for this type of wear and tear for a period of years after the purchase. Each fitting in the home has a lifespan, for example carpet has an estimated life of 10 years and a oven 12 years.

How does this work for new build homes?

Property investors purchasing a newly built home are able to claim depreciation on the capital works as well as the individual fittings that make up the property including (but not limited to) items like light fittings, ovens, dishwashers and flooring. Some items are depreciated over a 5 year period, whereas Capital works depreciation may be deducted over a period of 25 or 40 years.

Investors should consider depreciation as a way of further maximising return on their investment beyond capital growth and rental yield.

How do you claim depreciation?

It’s a good idea to consider chatting with a quantity surveyor before you start the process of planning to build a new home. They’re best placed to help you make decisions and ensure you achieve maximum taxation benefit from your purchase. They should be up to date with all of the latest ATO requirements and categories that can be claimed. Once construction has been completed, they will complete an inspection and provide you with a report that you can pass on to your accountant for your further tax returns.

According to one calculator online, a newly build a 25 sq home, may allow an investor to claim as much as $17,500 over the first five years of ownership for fixtures and fittings.

Interested in learning more about the benefits of an Aston Homes investment property? Let’s chat! Contact our friendly team on 1300 060 908 for more information on how we work.

The suggestions and advice provided is general only and may not be suitable for your individual needs. Before making any decision, you should seek financial expert advice.