Recent changes to the laws concerning second-hand property have led some Sunshine Coast investors to ask whether they can still claim tax depreciation on their purchase. Since 1987, renovations that were performed by the previous owner are offering considerable results for those who invest in the property. The new laws have changed little in that regard with only a relative few being advised that purchasing property that was established before 1987 without renovations that it’s not worth the trouble.
The deductions generated from this type of property comes from Division 43. This means that the property itself has been improved by the previous owner, such as new roofing, floorboards, etc. The improvements may amount to thousands in tax depreciation deductions over 40 years of owning the property. It’s little wonder that so many investors are looking to purchase properties with improvements.
The new Division 40 allows investors to claim depreciations for improvements they have done themselves, such as new carpeting, certain appliances, blinds, and so forth. For the Sunshine Coast property investor who has purchased property that already has improvements, the main difference the new laws make is that the depreciation is claimed at the end of the process, not the beginning.
For example, a property that was purchased and intended to be held for at least a decade has recently had a bathroom renovated. Over the next ten years, the property will build up a number of tax deductions because of the renovation. The end result is that the deductions over that time will count as tax depreciation at the end of the process, not at the beginning.
This means that second-hand properties will still generate considerable results, it’s just that some investors may not see the full measure of the deductions immediately. That’s why in rare cases, it may not be wise to invest in such properties. It’s a decision you will need to make before going ahead with the purchase.
For most investors, the answer is yes. This is because while the new rules for second-hand property have changed somewhat in terms of their tax depreciation, the overall effect is still the same. What is advisable for those who wish to purchase such property along the Sunshine Coast is that they seek out the advice of experts in tax law. Keep in mind that there may be loopholes or exceptions that may affect the deductions you receive.
That’s because there are certain circumstances in which you want to avoid purchasing second-hand property that has been improved or not improved. Such circumstances are dependent on several factors, so you should check with a professional team if your situation may result in making investment choices that may not have the desired results.
For investors concerned about purchasing second-hand property in the Sunshine Coast and not getting the tax depreciation they believe they deserve, the truth is that for most investors they will receive the deductions from purchasing properties with pre-existing improvements. Contact Bobby for clarification.
For Property Depreciation and Tax Allowances on investment properties please complete the information worksheet relevant to your property type. Submit online or print and fax.
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