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  • #59268
    TonyC
    Flatchatter

    Yes – depreciation is a great tax deduction, [as detailed in this story] yielding an typical tax deduction of $12,000 per annum for the first 5 to 10 years on a new investment house, home unit or villa in the $750,000 range.
    But there’s a sting in the tail! The deductions claimed are added to the capital gain on sale.
    The ATO gives this example –
    Karl and Louisa bought a residential rental property in November 2015 for a purchase price of $750,000 (1).
    They incur costs of purchase, including stamp duty and legal fees of $30,000 (2).
    After purchase they improved the property by constructing a fence for $6,000 (3).
    Over the 5 years of ownership of the property, they claimed $25,000 (average $5,000 per year) in decline in value deductions and $35,000 (average $7,000 per year) in capital works deductions (4).
    In November 2020 they sold the property for $900,000 (5). Their costs of sale, including legal fees, were $10,000 (6).
    Their ‘raw’ capital gain is $150,000 ((5) – (1)), against which they take away costs of purchase of $30,000 (2) and costs of sale of $10,000 (6) reducing the capital gain to $110,000.
    But they must add the depreciation deductions of $25,000 and $35,000 (4), which means the capital gain is now $170,000.
    Of course, having owned the property for more than 1 year, the capital gain is halved to $85,000.
    This is the link https://www.ato.gov.au/Individuals/Capital-gains-tax/Property-and-capital-gains-tax/CGT-when-selling-your-rental-property/

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  • #59274
    kaindub
    Flatchatter

    This is just another example of how the tax rules favour investors and discriminate against genuine live in occupiers.
    These deductions, along with interest and other outgoings are just not available to the genuine homebuyer.
    Either of the two main parties need to bite the bullet and invoke tax reform as has been recommended by several tax reviews.

    Otherwise we all will be living in rental accomodation.

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