How to meet your mortgage repayments during COVID-19

While leading lenders are offering a repayment holiday to borrowers caught in financial strife, one expert shares some alternate avenues to help ease the pressure.

The industry has manoeuvred through a myriad of stages since the onset of COVID-19. As swiftly as the pandemic had enveloped household finances – leaving many borrower’s incomes compromised overnight – leading lenders had introduced relief packages to assist borrowers in sustaining their home loan repayments in their hour of need.

While this comes as a welcome measure by ultimately allowing a borrower to delay their monthly repayment for three months, and in some instances six months, generally, if your loan term isn’t extended also, then your deferred repayments including the interest could impact your total loan balance.

Senior finance consultant at Orium Finance, Luke Heavey, says, “Keep in mind that any pause in repayments will end up being capitalised into the rest of the loan term but this can ease the financial burden of the repayments when you need it [the] most.”

In this case, Heavey advises borrowers to meet with a qualified and professional mortgage broker to explore the options that are available to them and how a repayment holiday would shape their loan.

“With growing economic uncertainty as a result of the coronavirus, many of us may be wondering how we will meet our mortgage repayments should our incomes be affected,” Heavey says.

“The good news is there are avenues in place to minimise or even delay mortgage repayments, which provides a safety net should your income be disrupted.”

Heavey shares three other ways in which you can potentially reduce your repayments and relieve some of the pressure of servicing your home loan during these disrupted times.

1. Check that your loan still has a competitive interest rate

The downward pull of the property market last year saw the slashing of the interest rate to a historic low.

But just as buyers, particularly first-timers, had thought that they were entering a home loan on the most advantageous playfield, the mounting threat of COVID-19 over the industry and the broader economy saw the RBA cut the cash rate even further to 0.25% in March.

“With record low interest rates, there’s a good chance that a better rate is up for grabs,” Heavey notes. “Talk to your mortgage broker about refinancing your mortgage to ensure it is costing you as little as possible.”

A mortgage broker can also direct you in the instance that refinancing your home loan is not a possibility for you at this moment in time; considering that some lenders have started to show signs of tightening their credit policies to minimise the occurrence of borrowers having to default on their loan.

Nevertheless, there’s also the option of seeking advice as to how you can reduce your monthly repayment by re-moulding your current loan term.

“To reduce your repayment amount, extend your loan term to 30 years and move to minimum repayments to reduce your monthly financial burden,” Heavey proposes.

2. Focus on paying down only a portion of your loan

“One way to reduce the monthly financial burden of your mortgage is to move to an interest only loan,” Heavey says.

A mortgage broker will be able to inform you on whether you can qualify for this, even if it’s for a few weeks or months.

Heavey shares, “As an added benefit, if the mortgage is for an investment property you can deduct the interest, making an interest only loan more desirable.”

3. Tap into the available equity in your home

The current situation will require you to re-assess your household budget, but while drawing equity out of your home is usually done for the means of accessing a deposit for your next property purchase, the ‘normal’ applies less in the midst of COVID-19.

Heavey says that having equity within your property may give you “access to a cash buffer” if you are able to refinance.

“Equity is the market value of your property minus what you owe on your existing home loan,” he explains.

Another option is finding out whether you are eligible to redraw from your home loan.

“If your loan has a redraw facility you may be able to access any additional repayments you’ve made on your home loan that are over and above the minimum payments,” Heavey says.

With a number of potential avenues available to borrowers in navigating through these uncertain times, a qualified and professional mortgage broker can structure a mortgage repayment plan that best suits your financial situation and long-term goals, as well as discuss the options that are available with your existing lender.

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

 

First Home Buyer Numbers Are Above Average Across Every State And Territory

According to ABS housing finance data for August 2019, first home buyers comprised the largest proportion of national owner occupier mortgage activity since early 2012.  The data showed first home buyers comprised 29.8% of the national market for owner occupier home loans; almost five percentage points above the decade average of 25%.  A similar trend can be seen across every state, with first home buyers a larger proportion of the market relative to the decade average.

There are a variety of factors that have provided first time buyers with a leg up into the housing market.  Housing affordability has improved through the recent housing downturn, mortgage rates have come down, home loan servicing rules have been relaxed and some states have provided additional incentives for first home buyers in the form of stamp duty exemptions or discounts as well as existing first home buyer grants which generally apply to the purchase of new dwellings across most states.  

There’s also the fact that first home buyers haven’t had to compete as fiercely with investors, with investor activity generally trending lower since peaking in 2015 at 43% of mortgage demand.  The August update shows investors comprised only 26% of mortgage demand which is well below the decade average of 34%.

First home buyers are the most active across the Northern Territory and Western Australia where this segment of the market comprises 45% and 37% respectively of owner occupier mortgage demand.  These are also the two regions where housing values have fallen the most, providing a substantial improvement to housing affordability.  Dwelling values are down 27% since peaking across the Northern Territory and 23% lower since peaking across Western Australia.  

The regions where first home buyers are the least active are South Australia and Tasmania where first time buyers comprised 22% and 24% of owner occupier mortgage demand in August.  Despite being the lowest of any state, first home buyer participation remains above the decade average in these regions. 

Looking forward it’s likely first home buyer’s will reduce as a proportion of overall market activity.  Housing prices are once again rising across most regions of the country while growth in household incomes remain sluggish, which will create renewed housing affordability pressures in markets where home values are rising faster than incomes. 

Source: The Real Estate Conversation 4th November 2019 https://www.therealestateconversation.com.au/blog/tim-lawless/first-home-buyer-numbers-are-above-average-across-every-state-and-territory

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

 

CPI continues to provide good news for buyers and renters

The September 2019 quarter CPI figure continues to be good news for home buyers and renters, according to the Real Estate Institute of Australia (REIA). 

“The All Groups CPI increased by 0.5 per cent in the December quarter giving an annual increase of 1.7 per cent,” said REIA President of Adrian Kelly. 

“The annual changes for the analytical series of trimmed mean and for the weighted median were 1.6 per cent and 1.2 per cent respectively.

At a glance:

  • All Groups CPI increased by 0.5 per cent
  • Housing Group increased by 0.3 per cent for the quarter
  • Rents increased by 0.1 per cent for the quarter

“The annual change in the trimmed mean has been below 2 per cent since December 2015 and for the weighted median since March 2018 ensuring the continuation of historically low official interest rates for some time yet. 

“The Housing Group increased by 0.3 per cent for the quarter and 0.4 per cent for the year to September 2019. 

“Rents increased by just 0.1 per cent for the quarter and increased by 0.4 per cent for the year.

Mr Kelly said the average annual change has been less than 1.0 per cent since December 2015. 

“With the RBA meeting next week home buyers can be comfortable in the knowledge that the latest inflation data would suggest that the RBA will not be increasing official interest rates for some time yet,” said Mr Kelly. 

Source: The Real Estate Conversation 17th October 2019 https://www.therealestateconversation.com.au/news/2019/10/17/first-home-owner-scheme-officially-legislated/1571267513

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

 

first home

First Home Owner Scheme officially legislated

The Bill to allow first home buyers easier access to the property market has now been passed in both the upper and lower houses.

first home

WILLIAMS MEDIA recently wrote of the progress of the First Home Loan Deposit Scheme as it made its way from the Senate to the Lower House. Read it here

The Bill to allow the scheme to become law has now passed through both the upper and lower houses and The Property Council welcomes the legislation that helps first homeowners and ensures a stronger supply of housing data for informed decision making.

Ken Morrison, Chief Executive of the Property Council of Australia, said the new first home loan scheme would not only provide pathways to home ownership for more Australians, but provide timely stimulus for housing and construction supply.

“The current ‘deposit gap’ has been a big hurdle for many first home buyers and adds to the time they need to spend saving to meet the lenders deposit requirements, or purchase expensive mortgage insurance,” Mr Morrison said.

At a glance:

  • It takes 9 years to save a 20 per cent deposit for a home
  • The First Home Loan Deposit Scheme reduces barriers for up to 10,000 homebuyers per year
  • Extra housing data will be available from new research function through the scheme

“According to recent data from CoreLogic, the average Australian homebuyer needs just under nine years to save for the 20 per cent deposit requirement – and longer in markets such as Melbourne and Sydney.”

“The First Home Loan Deposit Scheme reduces these barriers to entry for up to 10,000 first homebuyers every year, and boosts support for construction sector jobs, helping to drive economic growth at a critical time.

“We welcome a commitment to review the scheme after 12 months to ensure it will be responsive to demand.”

The Property Council also warmly welcomes the provision of extra housing data that will stem from the National Housing Finance and Investment Corporation’s (NHFIC) new research function.

“Australia has suffered from a lack of timely and reliable data on housing over past years,” Mr Morrison said.

“The NHFIC’s new research function will provide additional information on demand, supply and affordability that will be immensely helpful in shaping future housing policy.”

Source: The Real Estate Conversation 17th October 2019 https://www.therealestateconversation.com.au/news/2019/10/17/first-home-owner-scheme-officially-legislated/1571267513

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

 

depreciation deductions

How Investors can save thousands this October 31

Investors who self-assess or estimate costs based on their own judgement when lodging their tax return are potentially missing out on thousands of dollars, according to BMT Tax Depreciation.

With the October 31 tax deadline fast approaching, It’s common for investors to self-assess or estimate costs based on their own judgement when lodging their tax return.

However, investors who do so are potentially missing out on significant depreciation deductions by incorrectly evaluating their claims.

Depreciation is one of the most lucrative tax deductions because it’s a non-cash deduction, meaning investors don’t have to spend money to be eligible to claim it.

The Australian Taxation Office (ATO) allows owners of any income-producing properties to claim depreciation for the building’s structure via capital works deductions and for the plant and equipment assets contained within the property. 

In residential properties, capital works deductions must be depreciated at a rate of 2.5 per year for a maximum of forty years, while eligible plant and equipment assets must be depreciated over time using an effective life supplied by the ATO.

Read more about tax depreciation on the BMT Tax Depreciation website

Property investors who choose not to seek expert advice and self-assess deductions put themselves at risk of using the wrong depreciation rates and classifying items incorrectly.

As a result, they could be missing out on thousands of dollars’ worth of deductions. 

Quantity Surveyors are recognised under Tax Ruling 97/25 as one of the few professionals with the expert knowledge necessary for estimating construction costs for the purposes of calculating property depreciation.

A Quantity Surveyor can assess a property and provide a comprehensive depreciation schedule which outlines depreciation deductions accurately.

A tax depreciation schedule is the best way to ensure the biggest tax refund possible and can act as evidence should the ATO complete an audit of a claim.

There is no item too small to consider including in a schedule.

Low-cost assets and low-value assets all add up to maximise depreciation benefits.

If an asset has sufficiently low value, legislation allows it to be written off much faster or even claimed in full immediately.

A BMT Tax Depreciation Schedule covers all deductions available over the lifetime of a property (forty years) to maximise cash flow.

In FY 2018-19, BMT found residential clients an average of almost $9,000 in first-year tax deductions.

To find out more, Request a Quote or speak to the team at BMT Tax Depreciation.

Source: The Real Estate Conversation 8th October 2019 https://www.therealestateconversation.com.au/news/2019/10/08/how-investors-can-save-thousands-this-october-31/1570497759

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

 

spring property market

Spring has sprung | What’s happening to the property market?

Here’s what Australians can expect for the property market this spring.

As the weather heats up, so too does the property market.

spring property market
 
The market is warming up for spring with more properties being listed, good buyer enquiry for the lower price points and auctions being scheduled.
 
The higher-end price points are still a little soft and we’re not seeing much movement here, but if vendors are realistic they will get their properties sold.
 
During the winter months, we saw the rental market soften, as there is a lot more supply on the market due to the surge in duplex and unit builds over the past few years.
 
This ‘investor grade’ stock is now hitting the market in volume and renters can certainly get themselves a spring bargain if they negotiate a little.

We are seeing more and more incentives being offered to tenants than in years gone by, as landlords try to reduce vacancy on their properties.
 
It’s a good time to be shopping for a rental as there is rent-free periods, free iPads, water bills paid for 6 months and more rental incentives.
 
As for auctions, they are still not performing as well as they have in times gone by.
 
This is not so much a reflection of the time of year, but more a reflection of the changing lending landscape.

It’s harder for buyers to get finance so this keeps them wary of auctions.
 
This isn’t likely to change a whole lot between now and the end of the year.
 
Sellers do however have renewed confidence in the market, which will result in more stock becoming available.
 
Vendors will need to remain realistic with their pricing or they could find it hard to sell.

If they price right, they will attract a good amount of buyer interest.
 
Many sellers have been waiting for Spring to list their properties, so this is already starting to show through the listings.

I expect Adelaide, Brisbane, Canberra and Perth to experience the strongest price growth over the next three to five years compared to suburbs in once-booming Sydney and Melbourne.
 
The strong growth in Adelaide and Brisbane will come from strong job creation, infrastructure spend and high levels of buyer demand as well as the major public projects for Brisbane.
 
There’s also renewed confidence and great employment opportunities in Perth, leading the way for long-term property opportunities.
 
The key for anyone looking to get their head around a market is to look at vacancy rates, median price movements over the past 12 months and the median number of days on market alongside a whole lot of other statistics.
 
In Brisbane, we like Wynnum in the East and Nundah in the Inner North.
 
For Canberra, some of the areas we like are suburbs in and around Gungahlin. Firstly, you’ve got a lot of good services and amenities and secondly, you’ve got the new trams that pass through.
 
The little undiscovered areas 25 minutes south of the Adelaide CBD are also projected for growth. Suburbs around Morphett Vale, Woodcroft and even as far as Edwardstown are all affordable, have a good rental demand, good infrastructure and facilities and plenty of jobs.

Source: The Real Estate Conversation 18th September 2019 https://www.therealestateconversation.com.au/blog/anna-porter/spring-has-sprung-whats-happening-the-property-market/anna-porter-economist/anna

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

 

property styling

How Property Styling Boosts Sale Price

You shouldn’t judge a book by its cover – but buyers can and do judge a property by its presentation. With property styling, sellers can rise above the competition and negotiate the best possible profit.

property styling

In a digital age where buyers generally first view a potential new home or investment online, your property obviously needs to make a strong visual first impression.

As the seller, you want the property you are aiming to offload to look its very best, to appeal to as many potential buyers as possible.

Think of your home as a model. Professional models who sell products typically require some help to look as good as they do on promotional material: hair, makeup, styling, good lighting. The same applies to your real estate asset – and this is where property styling comes in.

“Property styling involves elements of maintenance and styling, including furniture and accessory installation, to present your property at its best before the property goes to the market,” explains Naomi Findlay, renovation expert and founder of the International Institute of Home Styling.

“It is not interior design, and it is not full scale renovating for wealth or house flipping. It is all about return on investment. Data collected from a leading Australian home staging company illustrated that during 2016, for every $1 invested in property staging, the property owner received a return of $20 on average.”

In fact, it’s estimated that staged properties boost sales prices by an average of 10%. So just how does property styling deliver that kind of benefit – and how can you incorporate styling into your property investment?

Source: Your Property Investment 22nd August 2019 https://www.yourinvestmentpropertymag.com.au/news/how-property-styling-boosts-sale-price-265161.aspx?utm_source=GA&utm_medium=20190822&utm_campaign=YIP-Newsletter-Opener&utm_content=&tu= 

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

 

market

Why there is never a market equilibrium

The market is currently in a sweet spot between market feast and famine.

market

When it comes to property markets, there is usually never a perfect equilibrium. 

What I mean is there is usually an oversupply or undersupply stock situation, such as too many new units being built. 

In the finance sector, the same goes, with lending either constricted or overflowing. 

Both of these factors have an impact on buyer and investor sentiment, but also the sentiment of vendors and selling agents, too. 

Plus, there are seasonal factors to consider such as winter, which is usually a period of slower market conditions. 

Of course, this is purely psychological because the time of year should have no impact on market activity. 

Also, there is the tax season when investors in particular are waiting on insights from their accountants to better understand their numbers, and whether they can afford to buy another property for their portfolio.

Changing times

So, it stands to reason, that July is usually a lower listings month because it’s the dead of winter, and not many people want to buy or sell. 

However, new SQM Research has highlighted that the number of listings, while still seasonally low, have reduced significantly from the same period last year in some locations. 

In fact, according to the research, year-on-year Sydney’s listings declined by 10.5 per cent, Darwin declined by 4.8 per cent and Perth by 2.6 per cent.

One of the reasons why this could be happening is that some vendors still have their heads in the property clouds, and aren’t prepared to list their properties until prices mystically go back to the levels that they were a few years ago.

Also, because of lower interest rates, more people are able to hold on to their properties, rather than selling because of cash flow problems. 

Going back to my original statement, though, currently there is an imbalance of buyers in my opinion.

That’s because many were stuck on the sidelines as they couldn’t secure finance until the serviceability calculations were reduced recently. 

Some of them now have the “fever” and are just buying any old thing, while the smart ones are being strategic with their property purchases.

The first state of play is where bidding wars take place, which is starting to happen more and more at auctions. 

Another sign of the market changing can be evidenced through my regular attendance at housing commission auctions in a suburb of Sydney. 

Over the past four months, attendance has gone from being half-full to standing room only. 

Plus, the sale prices of those properties have skyrocketed from about $388,000 to $476,000 in the space of a few short months. 

Another sign of market change is that the volume of listings with no price guides or advertised as “offers over” are also on the rise, because sellers and agents recognise the equilibrium is starting to swing back in their favour.

However, it’s not there yet. 

In fact, I believe we are now in a unique position that will see, by years’ end, the pendulum swing significantly back towards sellers.    

Many fundamentals are pointing towards stronger market conditions next year due to higher government spending on infrastructure, lower interest rates as well as incentives such as the first home buyer deposit scheme, which are all aimed at stimulating our economy.

That’s why the equilibrium is still on the side of buyers, even though listings aren’t exactly flush. 

Within six months, though, the number of buyers will have supercharged, and they will be competing against each other to purchase property – regardless of its quality. 

The smartest investors won’t delay before making their move. 

Source: The Real Estate Conversation 21st August 2019 https://www.therealestateconversation.com.au/blog/victor-kumar/why-there-never-market-equilibrium/victor-kumar-blog/victor-kumar-why-there-never

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

 

deposit

7 Tips For Saving Your Deposit

Investing in property is an enterprise that can take a lot of research, advice and sometimes even trial and error to get off the ground. And, most importantly, it takes money. There are many costs involved when it comes to buying a property, one of which is the initial deposit you’ll need to put down. Generally, most buyers aim to save or access a deposit of 10% of the purchase price, although a deposit of 20% is ideal if you want to avoid lenders mortgage insurance (LMI).

deposit

Prime Minister Scott Morrison recently outlined a First Home Loan Deposit Scheme that could help some buyers get their property goals off the ground with a deposit as low as just 5%. While the plan is intended to help first home buyers enter the property market, not investors, this could be a step towards rentvesting for those who are keen to leverage the scheme. For many, the prospect of saving a property deposit is daunting and is something they focus on once they are closer to wanting to buy. But to give yourself the best chance of growing the biggest possible deposit, you should ideally start planning and saving at least two years before you hope to buy.

This would mean you could save a greater amount and wouldn’t need to borrow as much from a bank or lender, which would serve you well in the current climate in which many investors are hampered by strict lending conditions.

 It would also increase your borrowing power and expand your loan options by allowing you to demonstrate a positive savings habit to potential lenders. In addition, if you could avoid having to pay the fee associated with LMI – which is a insurance policy that protects the lender in case of default – you could stand to save thousands of dollars.

For many investors-to-be, saving a property deposit can be a difficult prospect, especially if you find that you run out of money before you run out of month as it is. But with our tips for saving, you could be well on your way to landing your first investment property sooner rather than later.

1. Get budgeting

Budgeting sounds like the obvious tip – and it is. However, clear, strategic budgeting is about much more than simply saying you will put ‘X’ amount into your deposit savings every pay period. Instead, see if you can work out a budget that includes paying yourself a regular amount – enough to cover your essential bills, plus a discretionary spending allowance. You might find that it leaves you with more to set aside than your initial ‘X’ savings amount. To boost this value, look for opportunities to skim costs, such as by cooking more and eating out less. Go on a spending freeze for a month, when you don’t spend a cent on anything unless it’s absolutely necessary. Opt for Netflix and homemade comfort food rather than going out for dinner and a movie. In other words, make a few small sacrifices now to reap the rewards later.

2. Reduce your rent

This can be one of the most effective ways to save for a property deposit, as paying rent can take up a huge chunk of your earnings each month. While it’s not feasible in every situation, there are various ways to reduce rent, such as by housesharing, moving back in with your parents, or moving to a cheaper location. It might be slightly painful in the short term, but keep your eye on the prize: property ownership awaits.

3. Consolidate debts and credit cards

Consolidating debts and credit cards can reduce your repayments and interest, which frees up cash that can be redeployed into your savings account. Not only that, but the less debts you have, the more favourably your bank will look upon your home loan application. Banks offer debt consolidation or personal loans that allow you to combine these payments into one; or you can just make a plan to carve through your debts and smash it as swiftly as possible.

4. Simplify your life

Simplifying sounds… simplistic, but foregoing some of the little things will also help you save money. For instance, if you spend $100 over the course of the week on buying beverages – a coffee on the way to work or a beer at the pub after you’ve knocked off – then that’s $5,000 you’ve frittered away in a year alone. For every meal out that you would have bought, put that money into your savings. Work out what other things you can cut back on, and put the money not spent into your savings.

 

Do you use your gym membership, for instance? Could you use the exercise equipment in a park instead, or do you have equipment at 

home? Remember, cutting back to save a deposit doesn’t mean you have to live a completely spartan lifestyle, but it will be worth it when you reach your end goal.

5. Be a mindful consumer

Really think about your usage of fans, heaters and air conditioning throughout your home – energy bills can chew through thousands of dollars per year, and being smart about your consumption could see you make some significant savings. Could you hang your clothes out to dry instead of using a dryer, and wait to do your laundry when the load is full instead of in smaller batches?

6. Access the First Home Owner Grant

If this is your first home, you may be eligible for the First Home Owner Grant – however, there are conditions to be met, depending on the state or territory in which you intend to purchase the home, and the price of the property. Requirements vary, but generally you need to be a permanent resident or a citizen of Australia, and intend to buy the property as an individual and not as a corporation or trust. The applicant must live in the property as their principal place of residence within 12 months of the purchase, and remain there for at least 12 months.

7. Seek support

Some of the ways that family could help you get a leg up on the property ladder include lending or gifting money towards a deposit, or agreeing to go guarantor on the loan (using a proportion of the equity in their own home or investment property towards your property loan). As guarantor, they also become responsible for making loan repayments in case you are unable to do so; thus, you become a less risky prospect for a lender. The best way for this situation to work is when there is a win-win for both parties – for instance, if your parents provide a 20% deposit, then they retain 20% of the property’s value. Look for ways to exchange value, remembering that it might not always be monetary.

Applying these tips and learning how to save will not only help you get started in property investment but could also result in some important lifestyle changes that could benefit you in the long run. Not only will you be able to work towards saving a deposit but you’ll also be ready for a rainy financial day.

Source: Your Investment Property 25th July 2019 https://www.yourinvestmentpropertymag.com.au/property-tips/7-tips-for-saving-your-deposit-264440.aspx?utm_source=GA&utm_medium=20190728&utm_campaign=YIP-Newsletter-Opener&utm_content=&tu=

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

 

Tax Talk: Renovations Versus Repairs

Upgrading your investment property can propel it into its next stage of growth, but it can cost a pretty penny along the way.

Knowing which costs are immediately claimable from a tax perspective, and which ones are not, can make all the difference when preparing your reno budget.

Early on, the question must be asked: which repair costs can be funnelled back to you through the means of a well-prepared tax claim? And which costs are classed as a renovation, and are therefore added to your cost base – making their benefit known only once you sell the property?

The Australian Taxation Office (ATO) stipulates that a rental owner is entitled to claim the costs of any type of work done to an investment property, provided that the expense ultimately contributes towards its overall maintenance and repair.

By ‘repairs’, the ATO hones-in on any corrections that are made to damages, defects or instances of ‘wear and tear’, inflicted on the property during the time it is rented out to tenants.

“To repair something means to fix defects, including renewing parts. It does not include total reconstruction,” the ATO confirms.

So, in practice, whilst the replacement of a broken shower head or the re-sealing of a leaking bathtub are both considered tax claimable, transforming a perfectly functioning bathroom into an Art Deco meets Moroccan affair wouldn’t necessarily inspire the tax office’s seal of approval.

On the other end of the spectrum to ‘repairs’, there are the costs that are put towards the ‘maintenance’ of the rental property, which are also tax deductible. But what types of work does this cover?

Source: Your Investment Property 2nd August 2019 https://www.yourinvestmentpropertymag.com.au/news/tax-talk-renovations-versus-repairs-265044.aspx?utm_source=GA&utm_medium=20190804&utm_campaign=YIP-Newsletter-Opener&utm_content=&tu=

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.