I recently had a client approach me about buying off the plan. They were interested in the tax deductions that come with a depreciation schedule for new properties. While I understand the appeal of tax benefits, I had to tell them: buying off the plan is not the way to go.
In my experience, buying off the plan for tax reasons is a poor decision. Here’s why:
1. Off-the-Plan Purchases Often Lead to Supply and Demand Issues
When you buy off the plan, you’re entering an uncertain market. Developers often overestimate demand, leading to an oversupply of properties. This imbalance can stunt property value growth, leaving you with little or no uplift in value.
2. Forced Equity and Depreciation from Renovations
Instead of buying off the plan, I always recommend buying a secondhand property. With older properties, you can add value through renovations. A fresh coat of paint, updated kitchens, or extra living space can lead to a substantial increase in equity.
Renovations also offer tax advantages. You can claim a depreciation schedule for both the property and the renovation work. This means you get two tax deductions—one for the property itself and another for the renovation costs.
3. Better Equity Management
Renovating allows you to increase the equity in your property, which gives you more options. You can access that equity to fund future property purchases. This is a faster way to grow your portfolio compared to buying off the plan, where value increases may take longer to materialize.
Conclusion: Skip Off-the-Plan Properties for Tax Purposes
At the end of the day, buying off the plan for tax reasons is a bad idea. Instead, buy a secondhand property, make improvements, and enjoy the double tax deduction on renovations while also reaping the rewards of a higher uplift in property value. If you’re looking to build your wealth through property, this is the more effective and strategic way to go.
At Quantum Buyers Agents, we specialize in helping clients make smart property decisions, ensuring you’re getting the best value for your investment. If you’re ready to start building your portfolio with the right strategies in place, visit us at quantumbuyersagents.com.au to get started.
For more on why buying off the plan may not be the best option, you can check out articles from PropertyInvesting.com and RealEstate.com.au.
