Mr Taxman
Change the way you feel about taxes.
Get informed and discover what the taxman doesn't want you to know.
Sharing it with Australia, Mr Taxman is a regular Woman’s Day columist and TV finance commentator
  • click to visit Mr Taxman on Twitter
  • click to visit Mr Taxman on FaceBook
  • rss

Tax is key in the new-versus-old property debate for investors

Dec 09, 2016

REAL estate investors who buy new instead of old property can save more than $5000 a year from tax deductions and other benefits, but are being warned to crunch all the numbers before taking the plunge.

Property investment and accounting firm Nieuvision says new property delivers thousands of extra dollars of negative gearing and other tax incentives each year, while lower maintenance and repair costs save investors more money.

Tax deductions depend on the property and the investor’s tax rate, but are bigger for newer assets.

“Despite the benefits of negative gearing, we find that older-style properties cost investors on average about $80 per week or $4000 each year,” says Nieuvision director Mel Nieuwenhoven.

“However, investors can end up $20 to $30 in front each week, depending on their tax bracket, by purchasing new property instead.

“Investing in an older-style home on a large block with a big backyard may be appealing, but can come with higher stamp duty, fewer depreciation benefits and significant ongoing maintenance costs.”

Investors should think logically and avoid making emotional moves because investing is a financial decision, Nieuwenhoven says.

media_cameraNieuvision’s Melissa and Rick Nieuwenhoven warn investors to be wary about off-the-plan apartments.

Dr Adrian Raftery, Deakin University’s course director in financial planning, says if new and old properties are identical in price, size and location, it makes more financial sense to buy new.

“However, the reality is that the price of a brand new property is a lot higher,” Raftery says. Bigger tax deductions may be offset by the higher purchase price, larger interest payments, strata fees and building funds, he says.

“You really have to do your numbers because there can be bargains for older properties. Look at quality of workmanship. There’s a lot of 10-year-old properties that look 30 or 40 years old that probably won’t last 80-90 years like that ones that are that old now.”

Raftery says the biggest tax benefit from property comes from deductions that cost you nothing, such as depreciation of fixtures and fittings the writing down the value of the building cost at 2.5 per cent a year.

“If the building shell costs $300,000, you are getting an extra $7500 tax deduction every year for 40 years, plus probably $7000-$10,000 of deductions for the new fixtures and fittings if it’s one or two years old,” he says.

 

Investors should be careful about buying apartments amid an ongoing construction boom that has sparked warnings about oversupply in several capital cities.

Nieuwenhoven says investors should be wary about off-the-plan apartments, which can take longer to build than they expect.

“They also are generally sold for a premium,” she says. If you’re set on buying an apartment, choose an established one that is still relatively new so you get the good depreciation benefits, she says.

 

Article pblished in here on NT News on 9 December 2016

Originally published as Save $5000 a year on property

Comments

Post a New Comment

Media Availability

Are you interested in booking Mr Taxman for a speaking engagement or requesting his viewpoints for an article?

comments-rhsLatest Comments

  • "Hi, I see clients for a mobile service3 in the suburbs. My employer has her home address listed as our office- but I rarely go there (just going straight from home from client to client). I get..."

    By: Billie at Feb 13, 2020 6:57AM

    Post: Claiming car expenses

  • "hi, I am currently a housewife and I plan to start a business. I do not want to mention this income to my husband when we do our individual tax returns. (I love my husband but he is stubborn and he..."

    By: happy at Feb 04, 2020 11:33AM

    Post: Marriage

  • "Regarding the $30k tax write off,what is the eligibility criteria for used vehicles. Is there a klm or build year limit?"

    By: Mark Johnson at Dec 21, 2019 8:58PM

    Post: Claiming car expenses

  • "Does my accountant have access to my registered relationship eg: will they know who I am in a relationship with and since when? Al"

    By: al at Oct 31, 2019 6:43AM

    Post: Marriage

  • "Hi, I am a doctor and I am contracted to work at Hospital "A". I however rotate every 10 weeks in different hospitals for my work (say Hospital "B" a few months ago). Am I able to claim car travel..."

    By: Sam at Oct 30, 2019 5:54AM

    Post: Claiming car expenses