Increased property prices have forced many out of the market, causing a surge in demand for alternative living arrangements, according to BMT Tax Depreciation
Dual income properties have become a popular investment strategy in recent years, according to Bradley Beer, CEO of BMT Tax Depreciation.
"Increased property prices have forced many out of the market, causing a surge in demand for alternative living arrangements," said Mr Beer.
"Dual income properties provide an innovative solution for investors to meet such market demands.
"A property is classified as dual income when the owner generates two incomes by way of separate rental agreements.
"One of the most common dual income scenarios is when an investor owns a house and a granny flat."
A granny flat is a secondary dwelling generally situated in the backyard of an existing property.
Often studio sized, they are relatively affordable while still offering strong rental returns.
When a secondary dwelling such as a granny flat is income-producing the owner is entitled to substantial depreciation deductions, even if they are currently occupying the primary residence on the property.
Common areas between the granny flat and the owner-occupied property such as driveways, pools and barbecues may also entitle the owner to additional depreciation deductions.
Mr Beer said duplex units and dual occupancy properties are also considered dual income.
"Unlike a granny flat, a duplex refers to two residential properties that share a common wall," said Mr Beer.
"If duplexes are built on the same land title, they can be owned and sold as a pair.
"If they exist on separate land titles, investors can own and sell each duplex individually."
Mr Beer said dual-occupancy properties are like duplexes in that they consist of two dwellings on the one plot of land, but they don’t necessarily have to be adjoining.
"Dual-occupancy properties, also known as shared living, have single title ownership," said Mr Beer.
"This means there’s only one set of rates and no body corporate fees to consider.
"Whether it be a granny flat, duplex or dual occupancy property, a dual income investment can offer flexibility and opportunity to suit a range of investor needs.
"In addition, dual income property owners are entitled to substantial depreciation deductions."
Dual income property case study – granny flat
An investor decides to build a granny flat on their block of land.
The granny flat features a split system air conditioner, rangehood, hot water system, curtains, ceiling fans and a solar powered generating system, all of which have considerable depreciable value.
The table below outlines some of the plant and equipment assets within the granny flat, as well as detailing the first full-year and the cumulative first five-year depreciation deductions available to the property owner.
It’s important to note that these items are just some of the assets that can be depreciated.
The owner would also be eligible to claim capital works deductions for the building structure.
As the table shows, the investor can claim $6,549 in depreciation deductions in the first financial year and a further $27,529 in the first five years on these plant and equipment assets.
If the granny flat is situated on a block featuring another investment property, the investor can expect to claim thousands of dollars more.
During the FY 2018-19, BMT Tax Depreciation found residential investors an average first full-year deduction of almost $9,000.
These deductions help boost the investor’s cash flow and reduce their taxable income.
If you own or are considering building a dual income property, you can increase your tax return by organising a tax depreciation schedule with a specialist Quantity Surveyor.
Tax Ruling 97/25 states Quantity Surveyors such as BMT are one of the only professions qualified to estimate construction costs for depreciation.
To find out more, Request a Quote or speak to a BMT expert team on 1300 728 726 today.
Similar to this: