Since the announcement of the HomeBuilder grant of $25,000 we have had questions from our property investor community asking if they can use the grant to improve or extend their investment property. And subsequently, if they renovate the kitchen or bathroom of their investment property, what tax depreciation deductions are claimable.
Property Investors are not eligible for the Homebuilder grant if they are looking to buy a brand-new home that will be used as an investment property or if they wish to renovate their existing investment property. Also, companies and trusts who own residential property are also not eligible for the HomeBuilder grant.
The Australian Government is trying to assist the residential construction industry by offering the HomeBuilder grant of $25,000 to owner-occupiers and first home buyers.
However, as per treasury.gov.au – ‘If you move into the property as your principal place of residence immediately following the renovation and satisfy all of the eligibility criteria, you may receive the grant.
To access HomeBuilder, owner-occupier applicants must:
- be a natural person (not a company or trust);
- be aged 18 years or older on the contract date;
- be an Australian citizen;
- be below one of the following two income caps:
– $125,000 per annum for an individual applicant based on their 2018-19 taxable income or later;
$200,000 per annum for a couple based on their combined 2018-19 taxable income or later.
- enter into a contract from 4 June 2020 up to 31 December 2020 to:
- build a new home as a principal place of residence, where the property value (i.e. house and land) does not exceed $750,000;
- substantially renovate an existing home as a principal place of residence, where the renovation contract is greater than $150,000 and does not exceed $750,000, and where the value of the existing property (i.e. house and land, before renovation) does not exceed $1.5 million; or
- purchase an off-the-plan / new home as a principal place of residence where the contract price does not exceed $750,000 and construction had not commenced prior to 4 June 2020If you purchased your investment property to eventually move into it, maybe now is the time to complete that renovation.
Can I use the HomeBuilder grant to build a granny flat?
The HomeBuilder grant cannot be used for any additions to your principle place of residence such as detached structures ie granny flats, sheds or garages, or used for swimming pools, outdoor spas, basketball/tennis courts.
Can I use the HomeBuilder grant if I rent out a room at my principal place residence?
Yes. If you are renting out a room at your principal place of residence you can use the HomeBuilder grant for your renovation. You must be residing at your principal place of residence after the renovation has been completed.
Can I use the HomeBuilder grant for my DIY renovation?
No, you are not eligible for the $25,000 HomeBuilder grant. The renovation has to be undertaken by a licensed builders.
How can I access the HomeBuilder grant?
You will have to apply for the HomeBuilder grant through your State or Territory Revenue Office that you live in or plan to live in. Click here to find your states information.
When should I apply for the HomeBuilder grant?
Your application for the HomeBuilder Grant must be received by no later than the 31st of December 2020 to the relevant Revenue Office. Click here to find your states information.
Property Investors even though you are not allowed to use the HomeBuilder grant for your future investment property renovation, you can still claim great tax depreciation deductions from your renovation! You are also entitled to claim tax depreciation for previous owners renovations, Division 43 structural works.
For example, our property investor clients Jean and Inge purchased an existing property that was an original 1970’s house in 2017. Jean and Inge completed a $165,000 renovation in February 2019. The renovation included: new plumbing, electrical, kitchen and bathroom, deck, paint inside and out, new heating and cooling. Jean and Inge were able to claim in the 2019-2020 financial year $7,852 in tax depreciation deductions. And over the first five financial years $28,362.
Who can I talk to about depreciation for my investment property renovation?
A Capital Claims Tax Depreciation team member will be happy to answer any questions you may have about claiming depreciation on your investment property’s renovation. Call during business hours on 1300 922 220 or via email at firstname.lastname@example.org.