A Property blog by Paul Bennion.
The latest property figures produced by CoreLogic show that residential rents in Australia’s capital cities are now increasing at their lowest level on record at just over 2% for the year ending August 2015.
However, these national figures disguise the fact that some capital cities such as in Darwin and Perth, rents have fallen significantly over the past year.
In Darwin, for example, weekly rents for houses have fallen by a whopping 10.5% while rents for units have dropped by 9.1% during the past twelve months.
Perth landlords are also being hit hard by this slow down with rents for houses falling by 5.6% and units by 6.8% over the same period.
Both Darwin and Perth have been hit by a tri-fecta of negative factors that are forcing landlords to drop their rents – a decline in the resources sector and a surge in new residential building during time when migration rates are declining.
However, property investors in Darwin and Perth can offset this significant decline in rental income by boosting their cash flow through claiming the tax depreciation benefits associated with property investment.
These generous tax benefits do not just apply to investors who have just purchased an investment property.
If you already own a property for a period of time, you can undertake a tax depreciation report and use this to submit an amended tax return which can generate thousands of dollars in additional cash flow
It is estimated that only one in five residential investors make use of the tax depreciation entitlements which are available to all investors on all investment properties.
Most investors do not realize that tax benefits obtained through depreciation can be equivalent to 60% of the total purchase price of the property.
A large proportion of these tax benefits are never claimed which means that each year hundreds of millions of dollars in tax benefits are lost every year by investors not claiming their legitimate entitlements.
Investors fail to understand that the tax benefits from depreciation can be just as important as rental income.
This is particularly the case with people buying new strata investment property because one year’s depreciation allowance could be equal to several years of rental income.
A key part of ensuring that the investor obtains their full tax benefits is to have a professional depreciation professional prepare a comprehensive depreciation schedule of the property.
Even an older style property can also qualify for substantial tax depreciation benefits if a depreciation schedule is undertaken. If the older style apartment has recently been renovated then additional depreciation benefits can apply.