New Versus Old Property depreciation
If you’ve ever wondered what type of property will give you the best depreciation benefits – then this article will help you.
Buying new property will always result in the highest tax depreciation benefits. Generally speaking the higher the building, the higher the depreciation. Why? Because taller buildings have more services like lifts, gyms and fire services. And services like these attract higher rates of depreciation in comparison to bricks and concrete.
But it’s also important to remember that purchasing a new property can sometimes cost more than buying a 3 – 5 year old property. The difference in depreciation benefits between these options is not necessarily as substantial.
Purchasing a ‘newish’ property can mean paying less stamp duty and might mean a higher depreciation deduction relative to the purchase price.
Washington Brown’s Online Tax Depreciation Calculator shows a first year deduction of $18,000 for a Brand-New high rise unit costing $650,000 in Sydney. The calculator also shows that paying $650,000 for a unit built in 2011 would still attract a first year deduction of $17,000.
That’s only $1,000 difference over the whole year – not enough to make or break the deal in my opinion!
Another thing to consider is that when you buy a second hand property you can often get a more realistic view of the real value of the property by researching any re-sales that have occurred in the building once the building has been completed.
That’s only way to find out the true value of a property.
In summary, you don’t necessarily have to be buy Brand-New to get the best depreciation. Something almost new property (at 3-5 years) will still get you more than enough depreciation benefits.