How one year can make all the difference

How one year can make all the difference

Posted on Thursday, October 11 2012 at 2:24 PM

Tyron Hyde of quantity surveyor firm Washington Brown used to advise investors to purchase a property built in 1986.

An unusual loophole meant dwellings built between July 18, 1985 and September 15, 1987 could attract a four per cent building depreciation rate over a 25-year lifespan.

Properties built after that period attract a 2.5 per cent rate over a 40-year lifespan.

“The net result of purchasing properties in this odd period was increased tax deductions, and therefore cash flow, at a faster rate,” Hyde says.

As of September this year, the loophole effectively closed and any properties built prior to September 1987 don’t incur any building allowance, he says.

“However if you buy a property where construction commenced in 1988, you’ve still got 16 years to depreciate the building. That’s more than 40 per cent of the original construction cost left to claim. I know which I’d prefer.”

Investors in the market now should research the date of construction, especially if they suspect it was some time in the mid to late-1980s.

“It could make quite a difference,” he says. “The Australian Taxation Office identifies quantity surveyors as appropriately qualified to determine the original cost of construction, if those (figures) are unknown.”

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