Making your main residence an investment property


It’s common for a home-owner to show their main residence into an investment property. They could do that for varied causes, comparable to transferring for work, travelling abroad for an prolonged interval or they could merely determine to purchase one other property and lease out their earlier residence.

Before you flip your residence into an investment property, there are a number of components to contemplate.

Tax deductions and additions

Once a main residence turns into an investment property, tax reporting necessities change.

You will be capable of declare property bills comparable to curiosity prices, upkeep and administration charges as tax deductions. On the flip facet, the rental earnings you obtain will change into assessable earnings for that monetary yr.

Depreciation deductions

In addition to elevated tax-deductible bills, it is possible for you to to assert depreciation deductions.

Depreciation is the pure put on and tear of a constructing and the belongings inside it over time. The Australian Taxation Office permits buyers to assert this depreciation as a tax deduction.

An investor can declare depreciation deductions below two classes. The first class is capital works deductions, which refers back to the structural belongings of the property. BMT finds that capital works deductions usually make up between 85-90 per cent of a complete depreciation declare. The second is plant and tools, which refers back to the simply detachable fixtures and fittings.

Under present laws, you received’t be capable of declare plant and tools deductions for beforehand used belongings. A BMT Tax Depreciation Schedule will assist you to declare capital deductions on a proportion foundation, aligned with when the property was used for income-producing functions.

Common misconceptions

Property homeowners typically suppose that it’s not value getting a depreciation schedule for an older property. While it’s true that new properties could obtain larger deductions resulting from holding belongings with extra depreciable worth accessible, all investment properties could have deductions for the proprietor to assert.

The main cause for this false impression is as a result of if a constructing was constructed earlier than 15 September 1987, the investor can’t declare capital works depreciation on the construction. However, any capital works renovations since this date, and eligible plant and tools, will nonetheless entice depreciation deductions.

Capital beneficial properties implications

Your main residence is exempt from Capital Gains Tax (CGT). However, as soon as your main residence turns into an investment property, some CGT will be triggered when the property is ultimately bought.

It’s vital to debate this with your accountant as every situation is totally different. The CGT calculation is predicated on many components comparable to how lengthy it was your main residence, how lengthy it produced earnings and if the proprietor has one other main residence.

Insurance necessities

Landlord insurance coverage isn’t the one factor you have to take into consideration when defending your investment property.

The residence and contents insurance coverage you beforehand had on the property will not be appropriate as soon as the property is an investment. This is as a result of an investment property is topic to several types of dangers when in comparison with a main residence.

Once you determine to make your main residence an investment, you have to focus on your insurance coverage wants with your supplier. Failing to take action may lead to your property being underinsured.

Consult with an skilled

Turning your residence into an investment property is a giant resolution and also you need to be sure you do the whole lot you’ll be able to to maximise your money circulation. Contact the skilled crew at BMT Tax Depreciation on 1300 728 726 or Request a Quote to get a free estimate of the seemingly depreciation deductions you’ll be able to anticipate.

Article offered by BMT Tax Depreciation.

Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation. Please contact 1300 728 726 or go to for an Australia-wide service.


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