I understand that in nsw any investment property(building only) built after 1987 can be depretiated at 2.5% over 40 years.There might be more to it buy that is the basics that i have been told. My question is i am looking at a 50 plus year old house but it had a extention added in 2003 worth $150,000. Can this amount be depretiated at 2.5% over 40 years since it was recently built??
Anything structural can be depreciated over 40 from the year is was constructed (not the year you bought it) but there are probably costs inside that figure that can be depriciated quicker. For example if the kitchen was updated and included a freestanding stove (not an inbuilt oven) then as far as the ATO website is concerned this can be depreciated over a few years and not 40. This is one example of many so get on the ATO website and check out the list of 150 or so items that are listed and you can get a rough idea of what is a capital cost and what isn’t. If that $150K included the builders margin then that has to be deducted also as that isn’t able to be depreciated. If you are serious about the property then part of your due diligence may include getting a quantity surveyor to do a depreciation schedule for you; you may be pleasantly suprised. Keep in mind I am definately NO tax expert! Regards Julie[biggrin]
Hi devo76,
You are right that only buildings built after 87 can claim the special building write off over 40 years (2.5%PC), but also any building structure/capital improvements can also, depending upon when they were built, not when you buy the property. As JFisher said, it’s best to get a Quantity Surveyor report, unless you have the actual costs available.
ross
be also aware that any capital works / building writeoff money depreciated is minused off the capital base meaning you make more capital gain if sold later on –
Thus more capital gain tax payable.Comments are of a general nature and may not be relevant to your individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Yes, but if you hold the property for longer than 12 months, you get the 50% CGT discount.
Devo, some of that $150K will be ‘building’ and some will be Assets (fixtures and fittings). Roughly speaking, the building component may be $140K. That’s going to depreciate at 2.5%pa i.e. $3,500pa. The remaining $10K may be Assets. They depreciate more quickly than the building. In Year 1, you may get, say, $2,500 in depreciation from the Assets. These are just rough estimates to give you an idea of how it works.
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http://www.depreciator.com.auThanks for the response guys.Very helpful. I made a offer today so ill see what happens.One of my possible plans down the track is to sell the house we live in at the moment and take the $150,000 (approx)profit. Move into this investment property and make it our home and possibly add a few rooms to increase its value. HOw will this affect me tax wise with capital gains tax down the road etc.
Hi devo,
Your capital gain will be proportional based on the time you live in it V’s time rented. For example, if you rented it for 6 years and then lived in it for 4 years, taxable capital gain would be 60% of the total capital gain. Then the 50% discount would apply, so really only 30% of the capital gain will be taxable.
The new rooms added will increase the cost base, but you can’t claim any write off on these as at that time you won’t be renting it. But hopefully the additional cost will be more than compensated by an increase in the property value.
Hope this helps.
ross
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