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Over 1 in 4 property investors risking deductions by ‘living in’


New research shows more client investors are living in and renovating their property before renting it out, effectively reducing their tax deductions, says one depreciation specialist.

By Jotham Lian 11 minute read

New data from BMT Tax Depreciation for the 2018-19 financial year to date shows over one in four people had lived in their property prior to renting it out, representing a jump of nearly 2.3 per cent over the previous financial year.

BMT chief executive Bradley Beer said that, because of laws introduced in 2017 that no longer allow for deductions for the decline in value of previously used plant and equipment in rental premises used for residential accommodation, clients were potentially risking tax deductions by living in and installing new assets.

“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,” said Mr Beer.


Unless they have a good reason, Mr Beer said that investors who are planning on installing new plant and equipment assets should make these additions after they move out of the property and it has been listed for rent.

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.

“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,” said Bradley Beer.

“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.”

Despite the rule changes, Mr Beer believes there are still lucrative tax deductions on offer for most investment properties.

“We found an average of $8,212 in deductions in the [2017-18] financial year for all residential investment properties,” he said.

“Tax depreciation can dramatically increase the cash flow from an investment property so savvy investors should look attain a basic understanding of the rules and assemble a strong team of advisors to help take advantage of them.”

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Jotham Lian

Jotham Lian


Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.

Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.

You can email Jotham at: This email address is being protected from spambots. You need JavaScript enabled to view it. 

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