A Tax Depreciation blog by Paul Bennion.
The Federal budget has come and gone and it is interesting that much of the post budget commentary has largely ignored the positive impact it would have on the property market.
There are two reasons why this year’s budget will benefit the property market throughout Australia.
Firstly, the negative gearing benefits investors currently enjoy have been left intact. This fact will restore confidence back into the property investment market as the debate over the past several weeks about negative gearing has deterred many property investors buying property because of the uncertainty it created.
While the tax benefits of negative gearing have been protected, the same cannot be said about superannuation.
Important changes to superannuation rules include the concessional contribution amount being reduced from $35,000 per annum to $25,000 per annum and new superannuation restrictions being placed on high income earners.
These changes to superannuation will benefit the property market as it will encourage more baby boomer property investors who are approaching retirement to invest in property which still retains very attractive tax benefits.
Apart from negative gearing, property investors also enjoy very generous tax benefits related to depreciation.
These generous tax depreciation benefits can equate to up to 60% of the property price of a property. That’s means potential tax benefits of $300,000, for example, on a property purchased for $500,000.
When you consider that the cost of a tax depreciation report is only around $600 (and can be tax deductable), this is a very small payment for a huge financial return.
For people in their fifties who cannot rely on superannuation due to the latest changes outlined in the Federal Government, investing in property has now an added attraction because the generous tax incentives related to property investment remain in place.
Indeed, even before these latest changes to superannuation our company had recorded a significant rise in more mature Australians engaging our services to undertake tax depreciation reports for their properties as more decided to invest in property.
This is particularly the case with high income earners who will switch from investing in superannuation to property as a way to create wealth.
However, it is important to remember that if you buy an investment property, it is important to complete a tax depreciation schedule as soon as possible after settlement so that it complies with ATO guidelines.
For the initial cost of a tax depreciation report – which is tax deductible – by legitimately claiming their full depreciation allowances clients can achieve thousands of dollars in tax benefits each year from their investment. Even an older style home can also qualify for substantial tax depreciation benefits if a depreciation schedule is undertaken around the time of settlement.
To protect their interests and ensure the depreciation report is fully compliant with ATO rulings, property investors should select a company, like DEPPRO, that is a member of the Australian Institute of Quantity Surveyors (AIQS) and uses systems that are fully compliant with ATO rulings.