As tax time nears, many buyers of residences in new developments may miss out on their share of millions of dollars by failing to claim as much depreciation on their purchases as they are entitled to, experts warn.
Many simply fill in the forms and either ignore or underestimate the depreciation benefits, unaware of how much they stand to gain.
”Many investors don’t realise tax benefits obtained through depreciation can be equivalent to 60 per cent of the total purchase price of the property,” says the managing director of property depreciation specialist DEPPRO, Paul Bennion.
”I believe there is still much more to be claimed, potentially in the millions of dollars. For a typical one-bedroom inner-city unit of around $600,000, a purchaser would be able to claim $16,000-$17,000 in the first year off their tax.
”That would be up to $35,000 to $40,000 over three years. And that initial period for most buyers is when cash flow is likely to be more of a struggle.”
Residential property tax depreciation was introduced by the federal government in 1985 as a bid to boost investment in houses and apartments to ease the shortage of rental stock. Ever since, investors have been able to claim deductions on plant assets – fixtures and fittings – and on the actual building costs of the property.