There are no right or wrong answers when deciding whether to furnish your investment property. But there could be big tax savings in doing so, making it more appealing.
Furnished rentals tend to attract tenants looking for a short-term arrangement such as travellers and business professionals who regularly move for work. Furnished properties can also allow you to charge a higher rental rate and decrease the amount of time between tenancies by allowing tenants to move in quickly.
Investors often don’t consider the advantage of additional tax depreciation deductions available on furniture. If a furniture asset was purchased directly for an investment property, you can claim deprecation.
Furniture is a type of plant and equipment asset. Furniture with a value less than $1,000 can be deducted using a low-value pool, allowing it to be depreciated at an accelerated rate 18.75% in the year of purchase, then 37.5% every year following. Higher valued furniture depreciates at a rate set by the Australian Taxation Office, based on each item’s effective life, or how long it can be used to produce income.
A tax depreciation schedule is the best way to ensure you claim all deductions you’re entitled to. BMT found residential property investors an average of almost $9,000 in first full financial year deductions last financial year.
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Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation. Bradley joined BMT in 1998 and as such he has substantial knowledge about property investment supported by expertise in property depreciation and the construction industry.