It is important to consider the possible expenditures and tax breaks that come with investing to ensure you are receiving the ultimate return at the end of the financial year. New homes are fortunate in the fact that you will be able to claim a higher deduction on the property/properties because both Capital Works and Plant and Equipment is claimable.
What are these claimable items and what do they mean?
Capital Works allowance or building write off
The structural elements of the home and items within the property that cannot be removed but is considered a depreciable which include but are not limited to toilets, foundations, roof, built in storage, doors and windows. In addition to this, any building structural alterations and extensions are also claimable if they contribute to the value and/or upkeep of the home.
Plant and equipment
Items that can be removed but are included to produce income such as air conditioning, carpets, hot water units and appliances.
Therefore, many rental properties are fitted with air conditioning units instead of ducted because landlords can claim 20% depreciation on units compared to only 2.5% on ducted. Being able to choose such fittings is a major benefit when building as you can ensure that the property you build will maximise its return potential. Brand new homes have their full ‘working lives’ to be depreciated which is why the percentage is higher than an established home. All of the assets in a brand new home is eligible for depreciation as well, whereas secondhand assets can only be calculated as a lump sum claimable expense and will most likely be of a much lower value.
Speak to the team at Rivergum Homes to learn more about the benefits of depreciation.