realestatebusiness logo
Home of the REB Top 100 Agents

Timing is the key element in maximising tax breaks, says expert

By Tim Neary
10 April 2019 | 10 minute read
cash australian dollar reb

Property managers who have clients that choose to live in their investment property before it is rented should be aware that their clients are at risk of losing a bunch of lucrative tax deductions if they do so, one property tax expert has said.

BMT Tax Depreciation said that its data shows that over one in four people had lived in their property prior to renting it out, and may be at risk of losing thousands of dollars in tax deductions.

“Owners of income-producing investment properties can claim lucrative tax deductions for ‘plant and equipment’ items in a property such as carpet or air conditioning units. However, under the new laws, if an investor is living in a property at the time the assets are installed, the items will be considered previously used and cannot be claimed,” CEO Bradley Beer said.

“Our data suggests that a growing number of people are opting to live in a property while renovating and before renting it out. If they choose to make these types of additions to their property during this time, they could lose out on thousands of dollars of tax deductions.”

Mr Beer said that investors should make these additions after they move out of the property and it has been listed for rent.

“This simple approach could increase their depreciation deductions and improve the cash flow generated by the investment property each year.

“Capital works deductions for structural items such as new walls, kitchen cupboards, toilets and roof tiles are unaffected by the legislation changes and can be claimed by owners of income-producing investment properties.”

Mr Beer said that during the 2017–2018 financial year, 30.9 per cent of requests for BMT Depreciation schedules were for brand-new properties.


“This is up from 26.4 per cent of all depreciation schedule requests received during the 2015–2016 financial year.

“The new legislation does not affect buyers of new properties, so these properties typically hold the most lucrative value for investors from a tax perspective. This fact, and the new stock that has come on the market in recent years, may be contributing to the increased demand for new investment properties over second-hand properties.”

Mr Beer said there are still lucrative deductions on offer for most investment properties.

“We found an average of $8,212 in deductions in the 2017–2018 financial year for all residential investment properties,” he said.

Do you have an industry update?