What should you consider if you buy an investment property with a swimming pool? BMT Tax Depreciation looks at what can be claimed as depreciation.
With the weather starting to heat up, many Australians may decide to take the plunge and purchase a property with a pool or install a pool into their existing property to cope with those scorcher days.
While buying a property with a pool comes with its own set of pros and cons, there are further considerations if the owner has decided to rent the property out.
The main consideration is safety. Each state has its own strict regulations and standards on things such as fencing, filtration systems and certificates of compliance. In most cases you won’t be able to rent out your home until these are 100 per cent compliant, to ensure the safety of others.
Secondly, there’s the maintenance of the pool and the question of whether the landlord pays for its upkeep or expects the tenant to manage it themselves.
Insurance is another consideration; the owner should check whether their current policy will be adequate and cover swimming pools or if they need to update their policy.
Finally the owner must determine if a pool will add or detract from the value of the home – will it make it more or less appealing to rent out and what will it mean when it comes time to sell one day?
Visit BMT Tax Depreciation to find out more.
There is one major benefit of renting out a property with a pool and this is the additional depreciation deductions the owner will be eligible to claim.
Whether you’re planning on purchasing a property with a pool, installing a pool in your rental or already have pool in your rental which you aren’t currently claiming depreciation for, this is important to know.
Investors who are aware of their eligibility to claim depreciation deductions often focus on the building itself and the assets contained inside. However, outdoor items and structures are also depreciable due to the wear and tear that occurs over time. The depreciation that can be claimed from these outdoor assets adds up for investors and should not be overlooked.
The graphic below provides examples of some of the structural pool items that can be claimed as a capital works deduction and some of the easily removable assets that can be depreciated as plant and equipment*.
Source: BMT Tax Depreciation.
In this particular example, items in the pool will result in $2,874 in deductions in the first full financial year alone for the owner of this property.
Fixed items such as the in ground pool, slide, diving board, spa, pool fence and pool house resulted in $1,577 in capital works deductions in the first full financial year for the owner.
Easily removable plant and equipment assets such as the furniture, pergola, couch, outdoor lights and the pool filter and pump resulted in $1,297 in depreciation deductions for the owner in the first year.
These assets will continue to put money in the owner’s pockets for their depreciable life.
If an investor has researched the merit of installing a pool in their property but is unsure whether they’ll have the cash, the depreciation deductions that can be claimed may help make this dream feature a reality and more affordable.
*Under proposed changes outlined in draft legislation (section 2 of Treasury Laws Amendment Bill 2017), investors who exchange contracts on a second hand residential property after 7:30pm on 9th May 2017 will no longer be able to claim depreciation on plant and equipment assets. Investors who purchased prior to this date and those who purchase a brand new property will still be able to claim depreciation as they were previously. BMT Tax Depreciation has made an official submission outlining our concerns along with suggestions of alternative methods to better resolve the Government’s integrity issue.
To learn more about claiming depreciation for your swimming pool or other assets, contact the expert team at BMT Tax Depreciation on 1300 728 726.
This is a sponsored article.
Read more from BMT Tax Depreciation:
These missed deductions add up