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    Keep Claiming It!: A guide to property depreciation
    Keep Claiming It!: A guide to property depreciation
    Keep Claiming It!: A guide to property depreciation
    Ebook201 pages2 hours

    Keep Claiming It!: A guide to property depreciation

    By Tyron Hyde

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    About this ebook

    Depreciation is a tax deduction available to property investors that, if claimed, can add thousands of dollars to the returns from their investments. In the May 2017 Budget, the government introduced legislative changes to areas of taxation that affect property investors the main one being depreciation.In this book, one of Australia's most respected quantity surveyors Tyron Hyde covers all the changes property investors need to know and understand in this guide to property depreciation. Do the changes mean investors will stop choosing property? Will current investment property owners now sell off their investments because they can no longer claim deprecation in quite the same way? The answer to both these questions is no', they will (and they should) Keep Claiming It!
    LanguageEnglish
    PublisherMajor Street Publishing
    Release dateJan 1, 2022
    ISBN9781925283303
    Keep Claiming It!: A guide to property depreciation

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      Book preview

      Keep Claiming It! - Tyron Hyde

      PREFACE

      Since my first book – and the first book in Australia on depreciation – was published in 2013, a lot has happened. Median house prices in Sydney and Melbourne have increased by approximately 70 per cent, the mining boom is over, and the property boom that went with it has collapsed leaving many property investors devastated in its wake, and first home buyers are struggling to get onto the property market.

      Many blame the generous tax benefits available to property investors for this. The result, in May 2017, were legislative changes to areas of taxation that affect property investors, the main one being my area of expertise, depreciation.

      Does this mean investors will stop choosing property? Does this mean current investment property owners will sell off their investments because they can no longer claim depreciation in quite the same way? The answer to both of these questions is ‘no’, they will (and so they should) Keep Claiming It!

      chap1

      I still remember the massive excavation trucks, heavy with dirt, as they made their way out of the construction site. It was close to 30 years ago now and I was working part-time for my soon to be brother-in-law, a developer. My job? Counting the vehicles as they went in and out of the building site in Ashfield, Sydney. It was my job to keep a tally and confirm how many truckloads of earth had been excavated so that the contractor didn’t rip off my boss.

      Despite the hard work at the site, I was thankful for the work experience. I was also working part-time at McDonald’s while completing my Year 12 certificate.

      As we were chatting one day, I told my would-be brother-in-law, Peter, that I was still undecided about what to study at university. He told me two things that stuck with me and changed my life. First, he said: ‘You can only ever make real money working for yourself’ and, second, he told me that ‘In reality McDonald’s is a property development company – they just sell hamburgers on the side’.

      So, while flipping those burgers during my shift at McDonald’s, and counting those trucks during my shift at the construction site, I thought about what Peter had said. While I was trying to work out what he meant by McDonald’s being a property developer I enrolled in a Bachelor of Construction Economics degree.

      Before this, I had never really had an interest in real estate. My first choice had been to study architecture. It wasn’t exactly a passion, I just liked the idea of creating awesome buildings. But I didn’t make the cut-off. And with hindsight that proved to be one of the best things that has ever happened to me. It meant that I became a quantity surveyor instead.

      A bold offer

      It was during my final year at university, tired of juggling various part-time jobs with my studies, that I decided it was time to get a ‘real’ job – and soon.

      Before the internet and social media, some companies used to go to universities to recruit soon-to-be graduates. These companies were in search of the best and brightest students. As I was checking the school bulletin boards one day, I saw a job advert for a cadet quantity surveyor. It gave the name of the company (Washington Brown), a phone number and contact person. I did not waste any time. I grabbed the ad, along with all other copies of it pinned on various bulletin boards on campus, to make sure that no one else could see it.

      When I called the number, I made a bold and aggressive offer to the company owner. I told him I would work for him and the company for a year for free. He was definitely very pleased and took me up on my offer. I got the job!

      It was great working for a small company as it gave me the opportunity to learn every aspect of the business – from cost planning, project estimates, contract administration, measurement, to servic-ing clients. But most of all it taught me building contract law. My mentor, Tony Brown, was an expert in contract law.

      A few years into my role at Washington Brown, I wrote a thesis on property depreciation. The more I studied the subject, the more it became clear to me that there could be a great business opportunity in this area. Property depreciation was still new at the time – so new that it had not even been one of the subjects offered as part of my degree. While writing my thesis I spent days and nights understanding and working out depreciation and how it could benefit property owners and investors. As I said, remarkably, this hadn’t really been taught to me. I had to work it out on my own.

      It was during this time that the Australian Taxation Office (ATO) came out with a ruling that would prove to be a catalyst for the growth and understanding of property depreciation. The ruling relates to TR 97/25 and addendum. The ruling identifies quantity surveyors as having the appropriate skill set to estimate construction costs where the costs are unknown. Prior to this, most accountants just estimated these costs.

      For me, this highlighted an untapped niche in the market. The average investor didn’t even know about depreciation, and now the ATO had just ruled that quantity surveyors – like myself – were the appropriate professionals to provide that service.

      A bold move

      Remember the words of wisdom my soon to be brother-in-law gave me about only making real money if you work for yourself? Thinking about this piece of advice, and with my newly-acquired knowledge and understanding of property depreciation, I made another bold move.

      I left Washington Brown – and my mentor who then owned the company – and started my own quantity surveying firm called Property Depreciation Pty Ltd. My boss must have thought this was a ‘bold’ (or dumb) move to set up on my own. I was 27 years old with only a couple of years’ experience under my belt. I was leaving a job with a promising career path and plenty of room for advancement. But I didn’t want a promotion. I wanted to be my own boss. I moved back in with my mum in Leichhardt to save money. It was a pretty brave move.

      It was tough working on my own, without the support of any staff. I remember driving from one construction site to another, talking to developers and builders. I offered them free cost estimates for their projects, hoping that they would give me their depreciation reports to do later when the developments were complete.

      I wasn’t just selling a service. I was educating people on the benefits of depreciation at the same time. It was hard work, but it paid off. And before I knew it I had a decent list of clients, among them property developers, accountants and property investors.

      I continued working like this for about a year and a half. I wasn’t earning much money, but once my old boss at Washington Brown saw my business was successful, he invited me back as a partner to spearhead the depreciation side of their business. The rest, as they say, is history. I haven’t looked back since. Property depreciation is now one of the core services we offer at Washington Brown. We work with individuals, as well as corporate clients that include some of the major developers and investors in Australia.

      I’ve been with Washington Brown for more than 25 years now, and I’m proud of our growth and achievements over the years. From a team of two people, we’ve grown to more than 50 staff, and we have offices in most major Australian capital cities.

      I am most proud of all the thousands of Australians we have been able to help to claim their rightful depreciation allowances and so increase the returns from their property investments. And, I’m also proud of the difference we have made to many developers who, with our input, have succeeded in more profitable developments.

      The road to property investment

      I know I said earlier that I never really had an interest in property before I became a quantity surveyor, but having worked in the industry for more than two decades, I can now definitely say that I ‘like’ property. It’s an industry that I know and understand very well. Like any other industry (or investment opportunity), it has its ups and downs but in the long term, I believe property will remain an attractive and reliable investment.

      I’ve become the ‘go-to’ man for my friends and family who want to invest in property, and that’s a tricky position to be in. While I’ll happily take a punt with my own money, I’m extra cautious when it comes to telling other people how to spend theirs.

      Over the years, I’ve also invested in shares and both made and lost decent amounts of money. In my view, investing in the share market is a lot more stressful and I’m about to explain why.

      So, for all those who’ve asked me many times before… this is why I love property.

      Why I love property

      There are myriad reasons that explain why I have been drawn to property. Here are the six main reasons.

      Reason # 1: You can add value

      One of the principal advantages of investing in property is that you can buy a rundown old property and increase the value of your investment by getting your hands dirty, or paying someone to get theirs dirty!

      In comparison, it would be hard to add value to the Commonwealth Bank shares I own. Sure, I bank with the Commonwealth, but I don’t think my day-to-day savings account is going to add much value to the bank’s profits and in turn increase the value of my stock portfolio. Admittedly, I can vote when it comes to the company’s annual general meeting, but are the voting rights attached to my 1,000 shares really going to make a difference?

      Installing new carpet, painting and adding new blinds, however, that will make an immediate difference to the returns on an investment property.

      Reason # 2: There is limited supply

      A builder once said to me, ‘You can’t make property from a plastic mould’. I like the fact that property takes a while to plan and build because, in my opinion, the demand and supply equation has a lot to do with the price of property.

      A development across the road from where I live in Bondi was ‘in council’ for three years. This means it took three years for all the planning approvals to be passed – before construction was even started. And it took at least another two years to build. That’s five long years for the developers to wait before they started to see a return on their investment.

      With shares, however, the company can make a capital raising at any time or issue options to directors or employees. This type of activity may raise much needed funds for the company but it also dilutes your shareholding, making your piece of the pie smaller.

      In contrast, you or the government can’t just issue another house and land package in Bondi or any suburb for that matter.

      Reason # 3: There are some capital gains tax exemptions

      Unlike any shares I currently own, the home I live in does not attract capital gains tax (CGT) when I decide to sell it. Your principal place of residence is one of the only assets that you won’t pay CGT on when you sell it. This has proved lucrative

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