Housing Tax Integrity amendments could change how buyers invest in Wagga's residential property market

Fitzpatricks Real Estate director Richard Fitzpatrick thinks investors will still purchase around the city, despite new property tax amendments.
Fitzpatricks Real Estate director Richard Fitzpatrick thinks investors will still purchase around the city, despite new property tax amendments.

Amendments made to the Housing Tax Integrity legislation could change the way buyers choose to invest in Wagga’s residential property market.

The Treasury Laws Amendment denies tax deductions for the decline in value of previously used or second hand depreciating assets found within residential investment properties.

The new legislation will limit plant and equipment depreciation deductions to only those costs directly incurred by residential property investors and those who purchase new establishments.

However Fitzpatricks Real Estate director Richard Fitzpatrick thinks the changes are “probably minor” and said investors will still examine various “big ticket” items before spending in the region.

“Investors will continue to look at what rent they can get, whether or not that amount is suitable, if the property is in a good location, whether the city they’re investing will continue to get more tenants and if there will be rental growth,” he said.

“Another thing would be whether or not there is going to be a lot of issues with general maintenance. Those are the common questions investors look at.”

Under the changes, depreciation of acquired of second hand plant equipment assets will now be reflected in the cost base for capital gains tax purchases.

Local property valuer Chris Egan noted that depreciation allowances often “increase via net income” and said most investors will consider purchasing a property that would help grow their net return.

Leading Wagga property valuer, Chris Egan.

Leading Wagga property valuer, Chris Egan.

“We work in conjunction with the now and then," he said.

“Your non-main building items get allocated different depreciation rates. For example, carpet can be depreciated at a different rate to curtains.

“Investors are generally only concerned about the net income which is going directly into their bank accounts and, a property with a depreciation allowance will increase their net income.”

Mr Fitzpatrick recommended that property investors get a professional tax depreciation schedule completed in the event of a new purchase in order to maximise their savings.

“Investors will generally get that money (from the depreciation schedule) back in the first year,” he said.

“The investor will still be able to claim all of their maintenance and all the costs associated with rates such as water, agent fees and any interest over and above what their net income is.”