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TV’s Block buyers ‘could save millions on taxes’

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The eventual buyers of the properties being renovated on the Nine network’s Block reality TV series could save millions of dollars in depreciation over the life of their investment.

An “astounding” amount of depreciation deductions have been identified on The Block 2021 according to the show’s Executive Producer, Julian Cress.

Experts in the field, BMT Tax Depreciation, were asked to estimate the depreciation deductions available on this season’s properties and found the total maximum deductions to range between $3,091,000 and $3,610,000 per property, albeit over the maximum 40-year claimable period, with the highest figures found in Kirsty and Jesse’s House Five (above).

Depreciation, the natural wear and tear of property and its assets, is one of the highest tax deductions available to property investors and can be claimed for up to 40 years.

Julian Cress said that with private investors often snapping up the properties, the depreciation available will be a key selling point when it comes to auction time. 

“The properties on this season of The Block yield an insane amount of tax depreciation deductions. A savvy property investor will factor this into their purchase decision,” he said.

In a press release issued this week, BMT CEO, Bradley Beer, explained that the sizable nature of depreciation deductions on The Block properties is due to the extent of the renovations performed.

“These properties qualify for particularly strong depreciation deductions because they are substantially renovated,” said Bradley Beer.  

Substantial renovations occur where all, or substantially all, of a building is removed or replaced.

“This can include removing or replacing foundations, external walls, interior supporting walls, floors, roof or staircases. When combined, these would directly affect most rooms within a property,” said Mr Beer.

While the bulk of the depreciation deductions on The Block properties are attributed to capital works deductions (the structure), the plant and equipment (easily removable or mechanical assets) deductions are also significant. The estimated maximum total plant and equipment deductions BMT found ranged between $343,000 and $386,000 per property.

Bradley Beer explained that one of the benefits of substantially renovated properties is that investors who buy that property can claim depreciation on plant and equipment assets installed during the renovation, which is not the case for most second-hand investment properties.

“Because both plant and equipment and capital works depreciation of substantially renovated properties can be claimed, it makes them even more attractive to the buyer,” he said.

“Reducing tax liabilities will be part of an investor’s strategy and with these schedules the outcome will be fantastic for the new owners,” he concluded. 

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2 Replies to “TV’s Block buyers ‘could save millions on taxes’”

  1. kaindub says:

    This is just another example of how the tax rules favour investors and discriminate against genuine live in occupiers.
    These deductions, along with interest and other outgoings are just not available to the genuine homebuyer.
    Either of the two main parties need to bite the bullet and invoke tax reform as has been recommended by several tax reviews.
    Otherwise we all will be living in rental accomodation.

  2. TonyC says:

    Yes – depreciation is a great tax deduction, yielding an typical tax deduction of $12,000 per annum for the first 5 to 10 years on a new investment house, home unit or villa in the $750,000 range.
    But there’s a sting in the tail! The deductions claimed are added to the capital gain on sale.
    The ATO gives this example –
    Karl and Louisa bought a residential rental property in November 2015 for a purchase price of $750,000 (1).
    They incur costs of purchase, including stamp duty and legal fees of $30,000 (2).
    After purchase they improved the property by constructing a fence for $6,000 (3).
    Over the 5 years of ownership of the property, they claimed $25,000 (average $5,000 per year) in decline in value deductions and $35,000 (average $7,000 per year) in capital works deductions (4).
    In November 2020 they sold the property for $900,000 (5). Their costs of sale, including legal fees, were $10,000 (6).
    Their ‘raw’ capital gain is $150,000 ((5) – (1)), against which they take away costs of purchase of $30,000 (2) and costs of sale of $10,000 (6) reducing the capital gain to $110,000.
    But they must add the depreciation deductions of $25,000 and $35,000 (4), which means the capital gain is now $170,000.
    Of course, having owned the property for more than 1 year, the capital gain is halved to $85,000.
    This is the link https://www.ato.gov.au/Individuals/Capital-gains-tax/Property-and-capital-gains-tax/CGT-when-selling-your-rental-property/

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