New House Old House

From: Property Investor

Hi Everyone,

Can someone explain to me the difference in depreciation for a new house and for an older house ( say 5 or 10 years old ).
Apart from stamp duty what are the advantages and the disadvantages in this?

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Reply: 1
From: Les .

G'day Mannie,

The actual depreciation (Capital Allowance) % is identical, but there are a couple of things you need to be aware of.

1. An IP can be depreciated at 2.5% for 40 years, BUT those 40 years start at the date of building it. So, you can claim only 30 to 35 years of it, if it is 5 to 10 years old when you buy it.

2. The Capital Allowance is based on the cost of building it when it was built. So, for a 10 year old house, that cost might be only 50% of the cost of building a new one today.

3. And, if you sell it, any amount depreciated is tacked back on to your profit for CGT purposes. But you weren't going to sell, were you ;^)

Then there are all of those other Capital expenditures (like replacing a fence that was falling down when you bought the place, a new garage, and a patio) - they are also able to be claimed at 2.5% where they are not deemed to be a "repair".

I think someone (Duncan M?) put the Rental Properties Handbook in the answer to a recent post. If that doesn't cover it, there also used to be a "Depreciation Handbook". Is that still available on the ATO site, people?

And I'm NOT an accountant or other qualified person - these are just my opinions ....



- "Eschew Obfuscation" - ;^)
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Reply: 1.1
From: Property Investor

Hi Les,

I was fully aware of point 1 (well that's what I thought).
I needed to understand whether I should be concentrating on homes less than 5 years old if I wanted to maximise my tax benefits.
I have absolutely no intention of selling my properties.
Thanks for alerting me to the fact that there is a forum on Rentals and a Handbook which is available from the ATO.

Much appreciated,
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