First Home Owners - How to have your cake and eat it too!

What other country in the world gives you money to buy a property and then gives you a tax break for owning that property once you're no longer living there?

It may sound crazy but that's exactly what the Australian government has done.

Right now if you are a first home buyer, under the government's first home buyers scheme you are entitled to $21,000 for buying a new home and $14,000 for buying an established home. That in itself is a pretty good break considering interest rates are at their lowest in decades and property prices around the country have fallen.

But the real icing on the cake for first home buyers is that they are still eligible to claim depreciation on the property if they decide to rent the property out some time in the future.

The facts:

• To receive the first home owners grant, buyers are required to occupy the home as a principal place of residence for a continuous period of at least six months commencing within one year of the completion of the transaction.
  
• Depreciation allowances are calculated on the intended use of the property in the current tax year.
  
  

How to make it work for you:
The first homeowners grant favours buyers who purchase a brand new property. Generally speaking, new properties also attract higher depreciation allowances.

Before you buy, get an estimate of the likely depreciation allowances you'll get on your property once you rent it out. You can do this by using the Washington Brown Online Tax Depreciation Calculator. It will give you an estimate of the likely tax savings you'll get once you start using the property for investment purposes.

Quantity surveyors provide the tax payer with two options for claiming depreciation allowances. The diminishing value method accelerated the allowances you can claim and the prime cost method evenly spreads out the allowances. The one you choose will depend on how long you intend to use your property as an investment.

The amount the home buyer can claim is only affected while they live in the property. It is still depreciating at the same amount but you just can't claim this amount as a tax deduction.

The depreciation on every property will be different. If you decide to turn your castle into a rental down the track, make sure you talk with a qualified quantity surveyor to ensure you maximise your tax savings.

Tyron Hyde
Director
http://washingtonbrown.com.au