Hello, everyone.

How are you all doing out there?

I’m Kate Hill bringing you the best and unbiased and honest content on property along with fantastic hints and tips.

Today, let’s have a look at some of the tax advantages of new builds and how you can maximise your investment returns.

Have you ever wondered why savvy property investors love new build property?

It’s not just about modern designs or low maintenance.

One of the biggest perks is tax benefits that can supercharge your cash flow.

Tax incentives, particularly property depreciation, allow investors to claim thousands of dollars in deductions every year.

But what makes new builds stand out compared to established property?

Simple.

New homes offer significantly higher depreciation benefits, leading to lower taxable incomes and more money in your pocket.

So let’s explore how tax advantages, especially what we call division forty and division forty three, depreciation can enhance your investment returns.

So depreciation is an Australian tax office approved tax deduction that lets investors offset the wear and tear of their investment property over time.

It’s one of the most powerful tools for reducing taxable income, improving cash flow, and increasing long term returns.

Depreciation is split into two major categories, division forty, which is plant and equipment depreciation.

It covers fixtures and fittings inside your property, including carpets, blinds, appliances, air conditioning units, hot water systems.

Now these items lose value faster, so they’re written off over a shorter period of time, often five to ten years.

A new home might include thirty thousand dollars worth of eligible fixtures, and how much you can claim of that depends on your personal financial circumstances.

This is also the part where new build property trumps established property where the rules are quite different.

Division forty three, which is the capital works depreciation, it covers the building structure itself, the walls, the flooring, the roof, the driveways.

It’s depreciated over forty years from construction date at a fixed rate of two and a half percent per year.

It only applies to properties built after September nineteen eighty seven, making new builds more advantageous.

Now for example, if construction costs, let’s say, three hundred thousand dollars, investors can can claim seven and a half thousand dollars a year in depreciation every year for forty years.

I’ll give you an example.

So depreciation benefits in year one, Case study, new build versus established property.

So let’s compare the benefits for two property investments in their first year of ownership.

If your property type is a new build, the division forty, for example, could be maybe six thousand dollars of depreciation.

Your capital works, seven and a half.

Your total depreciation, thirteen and a half thousand dollars.

And then if your property type is an established property, say, built in two thousand, you are gonna get zero dollars for your fixtures and fittings.

For your capital works, you might get around three thousand dollars.

It depends on the property.

Your total depreciation is three thousand dollars.

So the investor buying a new build can claim an additional ten and a half thousand dollars in the first year alone, putting thousands of dollars back in your pocket.

So how does depreciation lower your out of pocket costs?

If, as an investor, you earn eighty thousand dollars, say, per year, and and you can claim thirteen and a half in depreciation, your taxable income is gonna drop to sixty six and a half thousand dollars, which can result in around four thousand dollars tax savings.

This significantly improves your cash flow, obviously.

Again, it’s gonna depend on your personal tax situation.

With lower taxes, investors can reinvest their portfolio or pay off loans faster.

Depreciation isn’t the only tax perk of new builds.

Investors can also claim deductions on the loan interest, property management fees, council rates, insurance, repairs, and maintenance.

These deductions will further reduce your taxable income, making new builds a financially smart choice for investors.

The tax advantages of new builds go beyond just aesthetics and modern designs.

Investors can leverage depreciation, claim tax deductions, and improve cash flow leading to better long term financial outcomes.

So let’s have a look again at some frequently asked questions I get about this because it can be quite complicated.

Question number one, what makes new builds better for tax purposes? So new builds, like I’ve said, offer higher depreciation benefits, particularly under division forty, the plant and equipment, and also the capital works.

This results in bigger tax deductions, which will improve cash flow.

Number two, can I claim depreciation on older investment properties? Yes.

You can. But generally only on division forty three, the capital works.

It’s the only one that applies, and it only applies to those properties that were built after nineteen eighty seven.

The plant and equipment really no longer applies to secondhand properties as of two thousand and seventeen if it is already been claimed by the previous owner.

Number three, how do I calculate depreciation on my new build?

So, yes, a good question.

A quantity surveyor will prepare a tax depreciation schedule outlining how much you can claim each year. This report helps maximise your deductions and ensures that you are ATO compliant.

You can also go to, quantity surveyors’ websites, and they often have, calculators where you can put in the year of construction, the location, what your fixtures and fittings are like.

It will calculate your likely depreciation amount for a property, which can be really helpful when you’re working out your cash flow.

Number four, does depreciation reduce my taxable income?

So yes, as I’ve been explaining, depreciation does lower your taxable income which in turn reduces the amount of tax you owe, obviously. This frees up more money for your investment.

And finally, question five that I get all the time, what other tax benefits do investors get with new builds?

So in addition to depreciation, investors can claim the loan interest, property management fees, council rates, maintenance costs, all those ongoing holding costs.

If you’re looking for maximum tax efficiency than higher depreciation claims, fewer maintenance headaches often, then new builds can really be the way to go if you get your location right.

So I will keep you posted about property from all around Australia as our year progresses.

Please don’t forget to hit like and subscribe, and I will see you all again very soon.

Bye.

Hello, everyone.

How are you all doing out there?

I’m Kate Hill bringing you the best and unbiased and honest content on property along with fantastic hints and tips.

Today, let’s have a look at some of the tax advantages of new builds and how you can maximise your investment returns.

Have you ever wondered why savvy property investors love new build property?

It’s not just about modern designs or low maintenance.

One of the biggest perks is tax benefits that can supercharge your cash flow.

Tax incentives, particularly property depreciation, allow investors to claim thousands of dollars in deductions every year.

But what makes new builds stand out compared to established property?

Simple.

New homes offer significantly higher depreciation benefits, leading to lower taxable incomes and more money in your pocket.

So let’s explore how tax advantages, especially what we call division forty and division forty three, depreciation can enhance your investment returns.

So depreciation is an Australian tax office approved tax deduction that lets investors offset the wear and tear of their investment property over time.

It’s one of the most powerful tools for reducing taxable income, improving cash flow, and increasing long term returns.

Depreciation is split into two major categories, division forty, which is plant and equipment depreciation.

It covers fixtures and fittings inside your property, including carpets, blinds, appliances, air conditioning units, hot water systems.

Now these items lose value faster, so they’re written off over a shorter period of time, often five to ten years.

A new home might include thirty thousand dollars worth of eligible fixtures, and how much you can claim of that depends on your personal financial circumstances.

This is also the part where new build property trumps established property where the rules are quite different.

Division forty three, which is the capital works depreciation, it covers the building structure itself, the walls, the flooring, the roof, the driveways.

It’s depreciated over forty years from construction date at a fixed rate of two and a half percent per year.

It only applies to properties built after September nineteen eighty seven, making new builds more advantageous.

Now for example, if construction costs, let’s say, three hundred thousand dollars, investors can can claim seven and a half thousand dollars a year in depreciation every year for forty years.

I’ll give you an example.

So depreciation benefits in year one, Case study, new build versus established property.

So let’s compare the benefits for two property investments in their first year of ownership.

If your property type is a new build, the division forty, for example, could be maybe six thousand dollars of depreciation.

Your capital works, seven and a half.

Your total depreciation, thirteen and a half thousand dollars.

And then if your property type is an established property, say, built in two thousand, you are gonna get zero dollars for your fixtures and fittings.

For your capital works, you might get around three thousand dollars.

It depends on the property.

Your total depreciation is three thousand dollars.

So the investor buying a new build can claim an additional ten and a half thousand dollars in the first year alone, putting thousands of dollars back in your pocket.

So how does depreciation lower your out of pocket costs?

If, as an investor, you earn eighty thousand dollars, say, per year, and and you can claim thirteen and a half in depreciation, your taxable income is gonna drop to sixty six and a half thousand dollars, which can result in around four thousand dollars tax savings.

This significantly improves your cash flow, obviously.

Again, it’s gonna depend on your personal tax situation.

With lower taxes, investors can reinvest their portfolio or pay off loans faster.

Depreciation isn’t the only tax perk of new builds.

Investors can also claim deductions on the loan interest, property management fees, council rates, insurance, repairs, and maintenance.

These deductions will further reduce your taxable income, making new builds a financially smart choice for investors.

The tax advantages of new builds go beyond just aesthetics and modern designs.

Investors can leverage depreciation, claim tax deductions, and improve cash flow leading to better long term financial outcomes.

So let’s have a look again at some frequently asked questions I get about this because it can be quite complicated.

Question number one, what makes new builds better for tax purposes? So new builds, like I’ve said, offer higher depreciation benefits, particularly under division forty, the plant and equipment, and also the capital works.

This results in bigger tax deductions, which will improve cash flow.

Number two, can I claim depreciation on older investment properties? Yes.

You can. But generally only on division forty three, the capital works.

It’s the only one that applies, and it only applies to those properties that were built after nineteen eighty seven.

The plant and equipment really no longer applies to secondhand properties as of two thousand and seventeen if it is already been claimed by the previous owner.

Number three, how do I calculate depreciation on my new build?

So, yes, a good question.

A quantity surveyor will prepare a tax depreciation schedule outlining how much you can claim each year. This report helps maximise your deductions and ensures that you are ATO compliant.

You can also go to, quantity surveyors’ websites, and they often have, calculators where you can put in the year of construction, the location, what your fixtures and fittings are like.

It will calculate your likely depreciation amount for a property, which can be really helpful when you’re working out your cash flow.

Number four, does depreciation reduce my taxable income?

So yes, as I’ve been explaining, depreciation does lower your taxable income which in turn reduces the amount of tax you owe, obviously. This frees up more money for your investment.

And finally, question five that I get all the time, what other tax benefits do investors get with new builds?

So in addition to depreciation, investors can claim the loan interest, property management fees, council rates, maintenance costs, all those ongoing holding costs.

If you’re looking for maximum tax efficiency than higher depreciation claims, fewer maintenance headaches often, then new builds can really be the way to go if you get your location right.

So I will keep you posted about property from all around Australia as our year progresses.

Please don’t forget to hit like and subscribe, and I will see you all again very soon.

Bye.

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