With mass evacuations of residents and price instability one can’t blame investors for being just a little gun shy when it comes to the idea of purchasing a high rise apartment. We asked JULIA HARTMAN, the Founder of BAN TACS – National Accountants Group for her take on the issues unfolding and what potential pitfalls investors need to be aware of.
It’s certainly, a hot topic these days. It even has me wondering if the exodus from that market will be so great that it will lead to decentralisation. Move enough people to a regional area and they will create their own jobs.
Decades ago I was told that a population of more than 250,000 made a town self-reliant. That the demise of any one industry would not have a major effect on the town’s economy.
Just before the mining downturn Townsville’s population hit 250,000. I saw clients up there having to sell their properties for less than what they purchased them for, so there was a downturn.
But in Mackay, where the population was around 130,0000, I saw clients sell properties for nearly half what they paid for them. It seems to me that the 250,000 population figure is ball park and I would be setting it as a minimum if I was seeking to decentralise my investment strategy.
Things to be aware of:
For readers stuck with a high-rise apartment of uncertain quality or those considering picking up a bargain, please bear in mind that you will not get a tax deduction for the repairs to the building.
The fault was there from the start, it is not a repair but an improvement to fix that fault. The only small chance you have is if the existing sinking fund can afford to pay for the repairs.
If a special levy is created specifically for the structural improvements, then the levy is not tax deductible. The best you can hope for is writing the cost off over 40 years under Div 43.
It will be interesting to see whether the Australian Taxation Office (ATO) will cut investors in the Opal Tower and Mascot building, some slack from a new law that started 1st July, 2019.
If your property is not actually available for rent then you can’t claim any expenses associated with it as a tax deduction even if it is your intention to rent it out when the repairs are completed. Obviously, the forced evacuations mean that the property is not available to rent.
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Julia Hartman is the founder of the BAN TACS National Accountants Group which has offices on the east and south coast of Australia, from Mackay to Adelaide.
General Advice Warning: This blog is not designed to replace professional advice. It has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the advice, in light of your own objectives, financial situation or needs before making any decision as to what is appropriate for you.