The Federal budget has expanded the Help to Buy scheme, with the government contributing up to 40% of a residential property's purchase price. Income caps have increased to $100,000 for singles and $160,000 for joint applicants, widening access for first-home buyers.
In a major policy shift, a two-year ban on foreign investors purchasing established homes will take effect from April 1, 2025, aiming to boost housing availability for Australians, with a $5.7 million ATO enforcement fund potentially extending these restrictions until 2030.
Adding to the momentum, the Reserve Bank of Australia delivered its first interest rate cut in four years early in 2025, reducing the cash rate from 4.35% to 4.10%, with further cuts anticipated, offering much-needed relief for borrowers.
With foreign investors temporarily sidelined, lower interest rates, shifts in policy and strong depreciation benefits available, now is an opportune time for investors to review their strategies and take advantage of these market shifts in the second-hand property sector.
Busting the myth: second-hand properties offer strong depreciation benefits
Bradley Beer, CEO of BMT Tax Depreciation, challenges the misconception that second-hand properties offer limited depreciation benefits.
66% of tax depreciation schedules prepared by BMT are for established properties that have been renovated or upgraded by either current or previous owners. He clarifies that "despite 2017 legislative changes restricting plant and equipment deductions for properties purchased before May 9, 2017, BMT's data shows that investors ineligible for these deductions still claimed an average of $6,661 in depreciation deductions in the last full financial year."
Capital works deductions: A key opportunity for investors
According to Mr. Beer, this is due to capital works deductions, which account for 85-90% of depreciation claims and relate to the building structure and permanent fixtures. These deductions, applicable to residential investment properties built after September 15, 1987, can be claimed at a rate of 2.5% annually for up to 40 years.
Depreciation opportunities for renovating investors
Mr. Beer adds that investors renovating or upgrading a second-hand investment property can claim depreciation on newly purchased plant and equipment assets, as well as being entitled to claim depreciation on renovations and upgrades completed by a previous owner.
Additionally, assets and capital works removed during renovations may qualify for 'scrapping,' allowing investors to claim the remaining depreciable value as an immediate deduction in the year of disposal, subject to asset classification and purchase year.
Mr. Beer emphasises the importance of working with a specialist quantity surveyor to accurately identify and maximise all eligible tax deductions on a second-hand investment property.
For tailored advice on maximising depreciation deductions on your investment property amidst these changes
