Tax entitlements of buying a new property. Buying a brand new property comes with greater tax entitlements compared to purchasing an existing property, particularly for investors. Here’s why:
Why a Brand New Investment Property Offers Better Tax Entitlements
Investing in a brand new property provides significantly better tax benefits than purchasing an existing property. These benefits come from higher depreciation deductions, reduced stamp duty costs, greater tax refunds, and lower maintenance expenses. Below, we break down the key tax entitlements and financial advantages of purchasing a brand new investment property
1. Depreciation Benefits (Brand New vs. Existing Property)
Capital Works Depreciation (Building) – 2.5% per Year
- Brand New Property: Eligible for 2.5% per year of the build cost for 40 years.
- Existing Property: Depreciation applies only if built after 1987, and the claimable amount is significantly lower.
Plant & Equipment Depreciation (Fixtures, Fittings, and Appliances)
- Brand New Property: Investors can claim depreciation on brand-new fixtures such as carpets, blinds, and appliances.
- Existing Property: Not claimable unless brand-new fixtures are installed after purchase.
| Depreciation Type | Brand New Property | Existing Property |
|---|---|---|
| Capital Works (Building Depreciation) | ✅ $9,500/year | ❌ Lower or None |
| Plant & Equipment Depreciation | ✅ $6,000 – $10,000 (Year 1) | ❌ None |
| Total Depreciation (Year 1) | ✅ $15,500 – $19,500 | ❌ Lower or None |
📌 Key Advantage: Brand new properties allow for significantly higher depreciation claims, reducing taxable income and increasing cash flow.
2. Stamp Duty Savings (Victoria)
Brand new off-the-plan properties in Victoria attract significant stamp duty concessions, leading to thousands of dollars in savings compared to existing properties.
| Cost Component | Brand New Property | Existing Property |
| Stamp Duty Payable | ✅ $21,970 (off-the-plan discount) | ❌ $40,070 |
| Stamp Duty Savings | ✅ $18,100 | ❌ None |
📌 Key Advantage: Investors purchasing a brand new property save approximately $18,100 in stamp duty costs compared to buying an existing property.
3. Loan Interest Deduction ($600,000 Loan @ 6%)
Interest on investment loans is tax-deductible regardless of property type.
| Loan Expense | Brand New Property | Existing Property |
| Annual Interest Deduction | ✅ $36,000 | ✅ $36,000 |
📌 Key Advantage: No difference between brand new and existing properties in loan interest deductions.
4. Rental Yield & Ongoing Costs
Brand new properties generally attract higher rental demand, lower vacancy risks, and reduced maintenance costs compared to existing properties.
| Factor | Brand New Property | Existing Property |
| Estimated Weekly Rent | ✅ $650 ($33,800/year) | ❌ Lower rent (outdated features) |
| Vacancy Risk | ✅ Lower (modern design, energy-efficient) | ❌ Higher (older features) |
| Maintenance Costs | ✅ Lower (brand new, under warranty) | ❌ Higher (more repairs required) |
📌 Key Advantage: Brand new properties attract higher rental returns and reduce ongoing expenses for maintenance and repairs.
5. Total First-Year Tax Deductions & Tax Refund
With an $80,000 annual salary, a buyer can significantly reduce their taxable income by purchasing a brand new property.
| Tax Deduction | Brand New Property | Existing Property |
| Depreciation | ✅ $15,500 – $19,500 | ❌ Lower (~$5,000) |
| Loan Interest | ✅ $36,000 | ✅ $36,000 |
| Total Deductions | ✅ $51,500 – $55,500 | ❌ $41,000 – $46,000 |
| Tax Refund (@ 32.5% tax rate) | ✅ $16,700 – $18,000 | ❌ $11,700 – $12,000 |
📌 Key Advantage: Investors in a brand new property can receive up to $6,000 more in tax refunds compared to an existing property.
6. Impact on Buyer’s Taxable Income ($80,000 Salary)
| Scenario | Brand New Property | Existing Property |
| Taxable Income Before Investment | $80,000 | $80,000 |
| Total Tax Deductions from Investment | $51,500 – $55,500 | $36,000 |
| New Taxable Income | $24,500 – $28,500 | $44,000 |
| Total Tax Payable (2024-25 rates) | ✅ $2,717 – $3,672 | ❌ $5,667 |
| Tax Refund Compared to No Investment | ✅ $16,700 – $18,000 | ❌ $11,700 – $12,000 |
📌 Key Advantage: A brand new property significantly reduces taxable income and increases the investor’s tax refund.
Final Verdict: Why a Brand New Investment Property is Better
| Factor | Brand New Property | Existing Property |
| Higher Tax Deductions | ✅ Yes | ❌ No |
| Lower Stamp Duty Costs | ✅ Yes ($18,100 savings) | ❌ No |
| Higher Tax Refund (First Year) | ✅ Yes (Up to $6,000 more) | ❌ No |
| Higher Rental Appeal | ✅ Yes (Modern design, energy-efficient) | ❌ No |
| Lower Maintenance Costs | ✅ Yes (Brand new, under warranty) | ❌ No |
Conclusion:
For an investor earning $80,000 per year, purchasing a brand new 4-bedroom house in Victoria would deliver stronger tax savings, lower upfront costs, and better long-term cash flow than an existing property.
What to Do Next in Your Property Investment Journey
While property investment offers significant benefits, it also comes with risks and challenges that should be carefully considered before making a decision. Thorough research, strategic planning, and professional advice can help mitigate potential risks and set you up for success.
At Crest Property Investments, we specialize in sourcing brand new and off-the-plan properties for buyers across Australia. If you’re looking for expert insights, market trends, or practical tips to guide your investment journey, we invite you to explore our resources:
✅ Visit Our Website: www.crestproperty.net.au for suburb profiles, investment strategies, and market insights.
✅ Watch & Learn: Our YouTube channel offers in-depth property discussions and expert advice.
✅ Stay Informed: Follow our Market Insights for the latest trends and opportunities.
✅ Get Personalized Guidance: Contact us for a free consultation—whether you’re a first-time investor or looking to expand your portfolio.
We take great care to provide accurate and up-to-date information, but market conditions and regulations may change over time. If you’d like tailored advice on your property investment goals, reach out to us—we’d love to help.
📅 March 2025
