Looking for an edge on your investment property in a challenging market?

Within the current challenging investment market, it’s important for property investors to consider how to make their properties more valuable and attractive.

Renovations such as a coat of paint or upgrades to kitchens and bathrooms are always at the top of the list when attracting tenants and adding value, but furnishing a property can also yield great results.

Following the introduction of the Housing Tax Integrity Bill (2017) last year, the government has put restrictions on how to claim second-hand plant and equipment which includes second-hand furniture. This new legislation affects properties that became an investment after June 30, 2017.

This means depreciation for any item that has been previously used cannot be claimed annually. Instead, the depreciation is accumulated and the total loss can be used to offset any capital gain when the property is sold.

If you are thinking about furnishing your investment property and looking to gain an immediate financial return on your furniture package, you will need to buy new over previously used items of furniture.

On the other hand, the initial outlay to furnish a property with second-hand furniture will be significantly less and these items will still depreciate, but as mentioned earlier the depreciation loss on these items will be accumulated and this loss can be claimed when the property changes hands.

The financial decision of furnishing your property needs to be weighed up against positioning the investment to attract the best possible tenant.

How does this new furniture look financially and how does it affect your Tax Depreciation Schedule?

Here some common items that are generally included in furnished properties:

ITEM VALUE EFFECTIVE LIFE YEAR 1 YEAR 2 YEAR 3
Dining Suite $1,400 13 $215 $182  $154
Washing Machine $1,650 10 $330 $264 $211
Lounge Chair $2,950 13 $454 $384 $325
Bed $1,380 13 $212 $180 $371
Television  $1,095 10 $219 $329 $205
Linen $290 5 $290 $0 $0
Kettle $75 5 $75 $0 $0
Microwave $270 10 $270 $0 $0
Utensils $165 5 $165 $0 $0
Barbeque $980 5 $392 $235 $141
Bedside Table $480 13 $90 $146 $91
Lamp $290 5 $290 $0 $0
Sound System $660 7 $124 $201 $126
Totals $11,685 $3,126 $1,921 $1,624

 

In the above table the total value of all new furniture is $11,685 with a total depreciation claim of $3,126 in the first financial year, $1,921 in the second year and $1,624 in the third. However, if these items had been previously used/second hand, no annual depreciation would be available.

To gain the most back in depreciation from your furniture package, the items need to be separated and individually listed in your schedule.

Any item with a purchase value of $300 or less can be claimed as an immediate deduction in the relevant financial year it was purchased. Items with a value between $301 and $1,000 will depreciate at 18.75% over the first year and increase to 37.5% in subsequent years.

For depreciation purposes, your traditional $25,000 new furniture package could give you a depreciation return of around $6,675 in the first year, $4,100 in the second year and $3,450 in the third year. A total of $14,225 (57% of the initial purchase price) could be claimed back in tax depreciation over the first three years after furnishing the property.

Want to claim more this financial year? It’s simple. Call 1300 RPM NOW or contact us online to arrange your Schedule today!