Boost for property investors

According to Bradley Beer, chief executive at BMT Tax Depreciation, most property investors don’t claim enough when it comes to depreciation.

“Comparing what people were getting and what they should get, we find about 80% of the time people are not maximising the deduction properly,” he says.

“For us to do a normal residential schedule it costs $700 plus GST, and we guarantee that if they don’t get twice that in the first year, then we don’t go ahead. We don’t do it if you don’t get deductions back. In the last financial year, the average deduction for people was $8300.”

He says the problem lies in properly categorising claimable items. Simple things like floating timber floors depreciate because they are seen as a removable item and can be claimed over a shorter period of time than floorboards.

“Quantity surveyors have a set of rules to work by and then, by knowing all the rules and doing a thorough job, they can estimate all the items properly,” says Beer. “Then you have to marry what you find with the tax rules – everything you miss will mean deductions are reduced.”

If you haven’t been claiming properly, all is not lost. “You can amend pretty easily two years of tax returns,” says Beer. “If you’ve owned the property four years and claimed incorrectly you can’t go back four years, but you can do two.”

When people buy an investment property off the plan they are usually presented with a depreciation schedule prepared by a property valuer. This is an important part of the investment because it gives a year-by-year claim allowance for depreciation of the property and the immovable contents, which includes carpets, curtains, ovens and stove tops. However, for those who have older properties there are still depreciation claims that can be made.

According to Peter Bembrick, HLB Mann Judd tax partner, if you buy off the plan the depreciation schedule is readily available, but for other properties you should get a report from a quantity surveyor.

“There are limits, and the rules have changed over the years. Structural improvement costs can only be depreciated if incurred on or after February 27, 1992,” says Bembrick.

There are two considerations. One is the actual building cost (around 2.5% depreciation each year), which involves getting a quantity surveyor to do an assessment and provide the amount available for a deduction. The other is the nature of furniture, fixtures, appliances, kitchens, bathrooms, washing machine, dryer, curtains, carpet and built-ins that also follow a depreciation schedule, which can be found on the tax office website.

David Latta, a Sydney-based vintage collectibles expert, has been selling items on eBay since 1998. On occasion, he’s been contracted to clear out a deceased estate or declutter a friend’s home, and he sells items online on behalf of other people too. Over time he’s been selling things he knows the most about – Hollywood memorabilia, art deco, atomic age, kitsch, ephemera, books and records.

And he has some tips on how you can benefit from selling once-prized items in the home: work out what’s valuable, what should go to an auction house, what can be sold on eBay and what can be collated for a garage sale, he says.

“eBay opened the world up for collectors. As people refined their collections, they would sell off lesser pieces to buy better pieces,” he says. “[Once] it was all about building collections. Before the internet, people thought they were the only ones collecting things, whether it be salt and pepper shakers, Victorian mourning jewellery or Beanie Babies.”

However, Latta says before jumping on sites like eBay and Gumtree, it may be better to seek help. Items such as coins and stamps are so specialised that, unless you really know what you’re doing, you should probably take them to a dealer. “Art in many cases is much better being sold through a specialist auction house, but there are a lot of things you could just eBay yourself – mainly things that are easy to mail,” he says.

His tips for getting started are:

• Do your research to get an idea of what an item is worth, which helps in setting realistic opening bids. There are numerous online resources for prices achieved at auction and some auction houses supply final prices.

• Condition is important. For example, while a pristine record will be worth more than one with lots of scratches, don’t throw the scratched one away because you might be able to get 25%-50% for it depending on its rarity.

• An eBay auction generally goes for seven days. However, there’s no guarantee that the right buyers are looking when you list your item. If it doesn’t sell, run it again at the same opening bid (maybe about half what you know others in the same condition have gone for) a week or two later. Then next time drop the bid by 25%.

“What you’re after is not one bidder but a couple of bidders who will want your item so much they’ll indulge in a bidding war,” says Latta. “The crazy thing is that collectors, maybe through boredom or just extra time at home, are still spending big and perhaps even bigger than ever during Covid-19.”

He says it’s not unusual for a single record by an obscure 1960s Australian or English act to sell for at least $400 and sometimes over $1000.

Currently, collectors seem to favour obscure ’60s garage or psychedelic rock and ’70s progressive rock. Country doesn’t sell well and classical is a niche market. Jazz sells but the best prices are achieved by original 1950s US pressings from specialist labels such as Blue Note. These sorts of things won’t be in every record collection, but you never know what grandad has tucked away in his record collection, says Latta.

Other highly sought items are antiquarian books, Australian art pottery, particularly early 20th century ceramics, and vintage fashion (anything from the vibrantly hued 1960s prints of Emilio Pucci to the punkishly outrageous Vivienne Westwood). Jewellery has long been collectible; even costume jewellery, such as art deco bakelite pieces, can command good prices.

Latta says nostalgia is a generational thing with the collectors who are coming up now, and they tend to “bower bird” the things they grew up with or that their parents had.

For tax purposes, selling items on eBay, Gumtree or Facebook Marketplace can be classed in different ways. According to Peter Bembrick, if you are just making the odd sale here and there, and not running a business, you won’t necessarily attract tax office attention. But he says the sharing economy as a whole is becoming a target and the ATO is getting better at finding information. For people selling anything like a car, dining table or book, the understanding is that they are not doing anything wrong with not declaring that profit, he says. “But if they start trading on eBay and are looking at something on the side to make money, it’s a risk people take to not declare it as income.”