New tax rules for residential properties driven by Sydney and Melbourne prices: Washington Brown's Tyron Hyde

“What type of investment property should I be looking for?”

According to quantity surveyor Washington Brown CEO Tyron Hyde, tax driven investments are not what an investor should focus on while buying an investment property.

Hyde was speaking at a webcast to address the issues around the new depreciation rules announced in the May 9 Federal Budget. 

The Budget sees rules being tightened around what can be claimed by property investors, specifically around depreciation deductions.

While for commercial or industrial properties nothing has changed and investors can still claim depreciable benefits and building allowance benefits, but the “investment focus of an investor or should not be about the tax driven benefits”, according to Hyde.

“You should be focusing on other things such as the infrastructure, yields etcetera, and then make the tax benefits work for you,” said Hyde in response to a question from a listener.

He acknowledged that it was easier said than done, but that should be the focus. Of course, commercial and industrial properties will still be able to reap the benefits of depreciable plant and equipment assets. 

Hyde said the government has targeted residential properties for the new depreciation rules. 

“In reality, let’s face it, they’re really targeting Sydney and Melbourne because someone who’s owned a property in Perth isn’t jumping up and down saying, I’ve got all these depreciation benefits when their property has gone backwards, right?”

“So in my view it is a Sydney and Melbourne kind of focus tax driven budget measure.”

But while the government’s announcements seek to address housing affordability issues, the RBA is equally concerned about the commercial property market because of a number of deals that have “ridiculous yields”.

But the government has left commercial properties continue the way they are for now because there’s a lot of big players in commercial.

He cited the example of Lendlease, “so when they buy a shopping centre, they can’t claim the air-conditioning in their shopping centre, that would be difficult”.