{"id":20595,"date":"2018-03-19T01:00:18","date_gmt":"2018-03-18T14:00:18","guid":{"rendered":"https:\/\/www.realestatetalk.com.au\/?p=20595"},"modified":"2018-03-19T01:00:18","modified_gmt":"2018-03-18T14:00:18","slug":"house-vs-unit-for-depreciation-brad-beer","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/house-vs-unit-for-depreciation-brad-beer\/","title":{"rendered":"House vs unit for depreciation \u2013 Brad Beer"},"content":{"rendered":"<p>This week we look at why depreciation allowances are higher on units.\u00a0 This can be very helpful if you are planning to make an investment purchase or to add to your existing property portfolio.\u00a0 <strong>Brad Beer<\/strong> \u2013 our depreciation expert \u2013 gives us the good oil.<br \/>\n<strong>Transcript:<\/strong><br \/>\n<strong>Kevin:<\/strong>\u00a0 Investors might be curious to know whether there is any difference in the depreciation deductions that they can claim for a house versus a unit. This type of information can also be useful for those tossing up their options when planning to make an investment purchase or to add to their existing property portfolio.<br \/>\nBrad Beer from BMT Tax Depreciation, which type of residential property \u2013 houses or units \u2013 generally provides more depreciation deductions for investors?<br \/>\nGood day, Brad. How are you doing?<br \/>\n<strong>Brad:<\/strong>\u00a0 Great, Kevin. Great to be here as always. Interesting question, and a couple of things to consider to start with. One is that I\u2019m the depreciation guy, but depreciation is not your only reason for buying one or the other.<br \/>\nA lot of people think that the houses will actually have high depreciation. If you talk to people outside of the people who know \u2013 me and my guys \u2013 they\u2019ll think houses get more deductions, but it\u2019s actually generally not the case. Units actually generally get more. There are more deductions for units than houses usually.<br \/>\n<strong>Kevin:<\/strong>\u00a0 What\u2019s the reason for that?<br \/>\n<strong>Brad:<\/strong>\u00a0 The reason is that the depreciation that you claim doesn\u2019t really relate to the value of the property; it relates to the cost of construction of that property and the things that are in that property that you can claim \u2013 the plant and equipment.<br \/>\nWhen you buy a unit, you buy a bit of land, you buy a bit more construction, but you also buy a lot of common areas. You pay for a portion of the underground car park, the lift, all those sorts of things. So, there is more construction cost in a unit as a percentage of your buy than there is in a house.<br \/>\nWith a house, you get a big piece of land. With a unit, you get a little piece of land, effectively.<br \/>\n<strong>Kevin:<\/strong>\u00a0 Common property, you mentioned that, and you\u2019ve given us a couple of really good examples there. Are there others that you can give us? And is it all about the common property? Is that why?<br \/>\n<strong>Brad:<\/strong>\u00a0 It\u2019s a combination of things. The fact that when you buy a unit, whatever you pay for it, a lot of what you\u2019re buying is actually the unit because you\u2019re only buying your portion as a percentage of the small piece of land that the block of units sit on, but the other thing is those common areas.<br \/>\nLift is a good example, because it\u2019s a plant and equipment item, so you get to claim it quicker. Underground car park is just a highly expensive item, and it is part of the building that you get 2.5% of. But there are a lot of those things that all add up.<br \/>\nThings like swimming pool filters, gym equipment, washing machines if they exist, automatic garage doors that are usually a bit more expensive than the one on your residential house, everything that\u2019s in the common area, you own a piece of, so you get to depreciate your piece of it.<br \/>\n<strong>Kevin:<\/strong>\u00a0 You mentioned car parks, and quite often, these car parks are underground. I\u2019ve actually seen some where they have to have some fairly expensive pumping equipment installed as well for land flow and overflow and that sort of thing. It really can mount up, And even the cost of lifts is quite high, isn\u2019t it?<br \/>\n<strong>Brad:<\/strong>\u00a0 The cost of a lift is high, and also because they\u2019re plant and equipment, you get to claim them a bit quicker.<br \/>\nWhen we do a depreciation schedule on a house, it has a list of items \u2013 the stove, the carpet, and things \u2013 whereas if you\u2019re in a large, multi-unit complex as you\u2019re talking about there, these pumps downstairs that pump out the water should something go wrong are plant and equipment items. They have a value. You get your portion of those. Everything that\u2019s down put in that car park, you get to claim a piece of, effectively, pretty much.<br \/>\n<strong>Kevin:<\/strong>\u00a0 Can we talk about another issue? And that is the age of the building. How does that have an impact on the deductions that a quantity surveyor is going to find, whether they are looking at a house or a unit?<br \/>\n<strong>Brad:<\/strong>\u00a0 Whether you are a house or a unit, the age of the building does have an impact on the deductions you\u2019re able to claim. The first thing I\u2019d say is I almost don\u2019t want to give you the important dates because the simple thing is\u00a0<strong>[4:16 inaudible]<\/strong>\u00a0going to get deductions, because regardless of the age of the building, you may or may not have much deductions. Ask the question first rather than trying to work it out yourself.<br \/>\nHowever, we will talk about the age a little bit. There are two parts of deductions you are able to claim. One is the deduction on the structure of the building, and the other is against that plant and equipment, just like we\u2019re talking about lifts, etc. In order to claim on the structure of the building, it needs to be built, if it\u2019s residential, after 1997.<br \/>\nWith our Budget changes last year \u2013 the federal Budget in May \u2013 that plant and equipment in a secondhand property is not even claimable anymore, so there are a few more things that the age comes into as an important question.<br \/>\nBut still, what I say is whatever the age of the property is, you ask the question and if you\u2019re crunching your numbers, one of those questions you have to ask is \u201cHow much are you going to pay for it? How much interest am I going to pay? How much depreciation will I get?\u201d Something built after 1997 now gets more than something before 1997, which has always been the case, but it\u2019s now more the case based on something you\u2019re looking at now.<br \/>\nThe important thing is as you\u2019re looking at properties, yes, newer gets more, after 1997 gets more, but it still comes down to use the simple tools, get a simple estimate of these things, crunch the numbers overall before you go ahead and look at the purchase. Age will be an important little piece of that question, one of many you have to ask yourself.<br \/>\n<strong>Kevin:<\/strong>\u00a0 Very valuable information. Brad, thank you so much. Brad Beer from BMT Tax Depreciation. Thanks for your time, mate.<br \/>\n<strong>Brad:<\/strong>\u00a0 Thanks, Kevin. Always a pleasure.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>This week we look at why depreciation allowances are higher on units.\u00a0 This can be very helpful if you are planning to make an investment purchase or to add to your existing property portfolio.\u00a0 Brad Beer \u2013 our depreciation expert \u2013 gives us the good&#8230;<\/p>\n","protected":false},"author":176692471,"featured_media":20596,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[34,10,11,13,36,22,25],"tags":[101],"class_list":["post-20595","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance-topic","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-property-investment-topic","category-research-topic","category-sponsored-channels","tag-podcast"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - 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