Your Money Your Call 20/07/2015 | Sky News Business

Momentum Wealth managing director Damian Collins joins host Michael Teys and BMT Tax Depreciation associate director Nol Petrohelos to discuss a range of property topics and answer viewer questions.

Check out the video above and transcription below.

Michael Teys, Presenter: Good evening, and welcome to your Monday night property edition of “Your Money Your Call”. I’m Michael Teys and I’m a bit croaky tonight, but nevertheless, happy to be here. And with me are two of our favourite regulars, Damian Collins from Momentum Wealth and Nol Petrohelos from BMT Tax Depreciation. We’re here to answer your questions and get your comments about our headline topics. So get to the phones and call us right now on 1300 30 34 35 or email us at Well, gentlemen, welcome to the program.

Damian Collins, Momentum Wealth: Hi, Michael.

Nol Petrohelos, BMT Tax Depreciation: Hi, Michael.

Michael Teys: Noel, continuing from some of the discussions that Margaret and Lisa have been having in the last couple of weeks, it’s the new financial year. At this time of year, people often have problems and confusion about your particular area, and that is depreciation of property. What are the sort of things you’re helping people with right now?

Nol Petrohelos: Well, the financial year is funny, because as it leads into the end of the financial year, coming up to June, we have this mad rush of people ordering depreciation schedules, because they really want to pay for that report and get that money back in their pocket straight away.

Michael Teys: I bet you hate that.

Nol Petrohelos: Well, you know, it’s funny, because there’s the pay as you go withholding variation. You know, the savvy investor, these days, will get a depreciation schedule straight away, as soon as they buy the property, go and submit their, or adjust their pay as you go withholding variation, and adjust their fortnightly take-home salary. So basically, their accountant submits an amount and their employer holds a little bit less based on the deductions that they’re going to get at the end of the financial year.

Michael Teys: So the first lesson is…

Nol Petrohelos: First lesson…

Michael Teys: …get the report immediately. Get the tax benefit immediately.

Nol Petrohelos: Definitely.

Michael Teys: Don’t leave it to 30 June.

Nol Petrohelos: Yeah, look. You manage your cash flow throughout the year, I think, is the way to go. You can, you know, if you’re not good with savings and you see your tax return is a forced saving option, then definitely wait until the end of the financial year to get your depreciation schedule and to go do your tax return. But really, a dollar today is worth more than a dollar tomorrow. You’ve got money in your pocket that you can then re-invest, pay down a little bit of debt.

It’s that lost opportunity, really, that people make the mistake and not wait until the end of the financial year or just before the end of the financial year to order their depreciation schedule. And people still do it. We’re out there educating people all the time about different ways they can do that. But they still tend to make that mistake. So, there is that mad rush leading right up to June 30, and then it sort of stops.

We get the eye of the storm, we call it, for about a week. And then, as we go into around this time, mid-July, right through to October is when most Australians will be doing their tax return. So, of course, they’re visiting their accountants. We work very closely with accountants, so a lot of those referrals are coming through. And that’s where we start seeing some of the points, the confusion points coming up. And another big one that we see often, is the “my property is too old.”

And, you know, people, I guess… because there’s two parts to depreciation, there’s the deduction available for the building right-off, which is the structural element to the building, and the deduction that’s available for the plant and equipment, so that’s all your carpets, blinds, light fitting, stove, hot water system, those kind of things, people tend to confuse those rules. Now, with the structural element to the building, and the building right-off component, it’s the wear and tear on the bricks, the roof, and what the ATO deem to be part of the structure or permanently fixed to the building.

It is governed by age, so anything older than 1987, for residential property, doesn’t actually get that, and 1982 for commercial properties. The plant and equipment, on the other hand, regardless of age, there’s a second-hand fair market value that can be put on those assets, and they can depreciate over time. So, we find even, you know, 50, 60-year old properties still get, you know, a substantial…

Michael Teys: There’s still some juice there.

Nol Petrohelos: There’s still some juice there. And look, even if it’s…you know, sometimes you might get an old property that’s had absolutely nothing done to it. You know, if you’ve got a 60 or a 70-year old property, the kitchen’s not 60 or 70 years old, usually, it’d be completely falling to pieces, and maybe uninhabitable. But, you know, usually, we’ll see a little bit of work done, but sometimes there’s absolutely nothing.

You know, the carpets will be still there. There’ll be some blinds. There’ll be some light fittings. Every house has a hot water system, a stove. We can put a value on those assets and are often surprised by what we can get out of it. And, you know, we’ve seen, I’ve seen 60, 70, 80-year old properties in their first year get, you know, $4,000 or $5,000 as a deduction.

And on a 37% tax bracket, that’s still, you know, $1,500, $1,800 back in their pocket, so it pays for the tax-deductible report and puts money back in their pocket straight away. Then they’ve got year two, year three, year four, and so on. So, yeah, we still see those little bits rearing their heads this time of year.

Michael Teys: Damian, you’re one of those accountants that…

Damian Collins: [inaudible 00:05:30] accountant, yes.

Michael Teys: You’re a…so a recovering accountant.

Damian Collins: I’m clarifying.

Michael Teys: Recovering accountant. Tell me about your experiences at this time of year with your clients, and, you know, what you’re getting people to do.

Damian Collins: Yeah, well, look, we certainly get our clients to get depreciation reports on every investment property, and when we actually acquire it, no, we don’t do a mad rush at the 30 June end of year. What we do see, sometimes, this time of year, in our finance division, is people looking for, perhaps, pre-paying a bit of interest. Although, I’ve got to say, that’s tapered off a bit this year, just with rates so low.

Having said that, there’s people wanting to do that and claiming their tax deductions as much as previously, but that’s a common thing we do. A lot of people also think, “I’ll put off a buying decision until the next financial year.” Well, it doesn’t really matter from a…

Michael Teys: Doesn’t matter, no.

Damian Collins: …income tax point of view. Obviously, you’re going to start getting the deductions when it settles, and you’re starting to have rental income, and expenses, and so forth. And from a capital gains, yeah, it won’t really matter as long as you hold it for longer than 12 months. So, from our point of view, apart from the pre-paid interest, there’s not a huge amount towards the end of financial year.

Michael Teys: To be done. Now, you’re a recovering accountant, but you’re also from Perth.

Damian Collins: I am.

Michael Teys: So tell us what’s happening over there. And tell the viewers a bit about the nature of your business and what you do there.

Damian Collins: Yeah, so Momentum Wealth, we’re a property investment advisory firm. We help the clients with the property investment strategy, where to buy, what to do, and then arrange the finance. And we have a buyer’s agency division as well as…and manage the property if it’s in Perth. If it’s out of Perth, we get other people to manage the clients’ properties. So a lot of our clients are certainly looking interstate. We’ve been doing a bit of work in Brisbane for a number of clients. But we still think over the…if you’re invested in property for a 10-year time period, Perth and Brisbane are still our two favourite cities. I think Sydney, Melbourne will do okay, still, but, you know…

Michael Teys: A little bit complicated.

Damian Collins: A bit complicated. We look at the, you know, the factors that are going to drive it. Yes, they are certainly more volatile, Perth particularly, and Brisbane, which is in a down part of the cycle at the moment. But, you know, strangely, people think the end of the world is coming in Perth. Well, actually, they’re still employing lots of people, Rio, BHP. The shareholders are taking a bigger hit because iron ore prices have come down.

Yes, there’s been some cost cutting, but we’re finding, on the rare occasions where clients lose jobs, they’re picking them up, except the engineering sector. That’s the one that’s really got hit.

Michael Teys: Yes, that is hurting.

Damian Collins: But generally, the mining, on-site stuff…

Michael Teys: All good.

Damian Collins: …there’s still plenty of work around.

Michael Teys: Okay, good. Well, we’ll talk a little more about Sydney and Melbourne a little later in the show, but we’ve got our first caller on the line. Colin, you’re calling about Port Macquarie, I understand.

Colin: Yes. Thanks, guys, for taking my call.

Michael Teys: Not at all.

Colin: Yeah, what do you guys think on the Port Macquarie area? Do you think it’s stagnated or it’s getting noose ahead, or…?

Michael Teys: Why? Can I ask why you’re looking there, Colin?

Colin: Oh, it’s just property-wise, is it worth buying there?

Michael Teys: All right, good. Okay, well, Nol, why don’t you start us off on your thoughts on Port Macquarie?

Nol Petrohelos: Port Macquarie is a beautiful town. And what happens at Port Macquarie, I think, is people go there for a holiday and it’s got the most beautiful beaches, and the most beautiful harbour and it’s a great place to live. And look, as a place to invest, I’m not saying there’s anything wrong with that, but just be careful getting mixed up with that holiday dream. I know it does feed off the Sydney economy, because it is a holiday town

And it had a really good run back in the…around 2005. So the area from, probably, 2003 through to 2005, and then when we went into the global financial crisis in 2008, and Sydney really started to go into the doldrums, it really got hurt by that and didn’t do a whole heap for a period of time. I pass through Port Macquarie quite often and stop there, because my wife’s family live in Coffs Harbour and it’s on the way. Beautiful place. It is growing, but it’s sort of the place that’s just going to tick away over time, I think. And as, you know, Sydney’s had a great couple of years, and I think a little bit of the ripple effect from that, you might see a little bit of growth over the short-term, but I think it’s one of those places that’s just going to slowly poke away as an investment.

Michael Teys: It’s always had the benefit of being an independent seat, or it’s been an independent seat, and it’s had the benefit of some rather largesse spending from government from time to time as well.

Nol Petrohelos: Yeah, okay, yeah.

Michael Teys: So that’s sort of helped it along. Damian, have you had any experience in the area?

Damian Collins: Not particularly with Port Macquarie, but certainly, Colin, what I find is, in our research here, when the major cities start to take off, as we’re seeing in Sydney, then the holiday home market does certainly start to pick up. What you find is people start to feel a lot wealthier. They decide they’re going to go and get a holiday property for long weekends. But the downside of that is when the market’s off again, they’re one of the first things to go, or if people get into some financial difficulty, or interest rates go up.

So, look, I wouldn’t be investing, generally, in a holiday town. I want to know what the strong industries are that’s going to keep Port Macquarie going. So you need to do a fair bit of research on that, I’d say, Colin. See what the industries are. Are they sustainable? Are they high paying? Are they going to, you know, draw more people to their town? If not, then I wouldn’t be taking a punt on it.

Michael Teys: Yeah, I always get interested in why people sort of say, “What do you think about this place?” Rather than approaching it the other way of, you know, “Where should I?” You know, a more open-ended question. And that comes, I guess, from familiarity. You know, we’ve got a friend or someone else has been there, or we went there and we thought it was a nice place, or there’s that emotional sort of side to it, isn’t there?

Damian Collins: There is. Look, there’s about 14,000 suburbs around all locations around Australia. And often, people, because there’s so much, they make choices on emotion. And buying property, that’s not the way to go.

Michael Teys: You should never buy property when you’re on holiday, should you?

Nol Petrohelos: No.

Michael Teys: Never.

Damian Collins: Definitely not.

Michael Teys: Never.

Nol Petrohelos: Yeah, I‘ve seen, come across the odd person, and me included, you do fall in love with a place while you’re on holidays, and you think, “I want to invest in this place and support it.” And, you know, sometimes it does work out. But as Damian said, you’ve got to look at the bigger picture. You know, what the drivers are. Who’s going to pay the bills? Who’s employing in that area?

Michael Teys: I call it the second Tuesday syndrome.

Nol Petrohelos: Yeah.

Michael Teys: So, I always reckon it’s the second Tuesday of the holiday when you’re just over the kids, you haven’t spent that much time with your wife since last holiday, and you just need a break. So you get out and you go for a stroll, and you start looking at real estate. And you think, “That’s a good idea.” And that’s when you come undone.

Nol Petrohelos: And you’re in the middle of summer.

Michael Teys: It’s always the second Tuesday.

Nol Petrohelos: Yeah, you’re in the middle of summer and you think, “Wow, this place is booming.”

Michael Teys: Yeah, this is terrific. Yeah, I can’t miss.

Nol Petrohelos: But Port Macquarie is a beautiful little town, I will say. And we do do a few depreciation schedules there, so there is a bit of investment stock around.

Michael Teys: All right, good. Well, thanks for tuning in. And don’t forget that this week, like always, we’ll be continuing with our question of the week. And this is your chance to get hold of a copy of one of Margaret’s books. Each Monday night, the panel and I choose one question from either the emails or the calls, and send a copy of Margaret’s brand new book “How to Achieve Property Success.”

And if you’re already an investor, this book will make sure that you cover every single part of the process. All you have to do is call us on 1300 30 34 35, or email with a question, and make sure you’re watching at the end of the show to see if you’re our lucky winner. Well, it’s time now for us to take a short break, but don’t go away. When we come back, we’ll take many of your calls and answer more of your questions.

Michael Teys: Welcome back, and thanks for joining me for the new extended format of “Your Money Your Call”. I’m Michael Teys, and joining me tonight is Damian Collins from Momentum Wealth and Nol Petrohelos from BMT Tax Depreciation. So don’t waste any time, call us now on 13…someone’s calling right now on 1300 30 34 35. Or, of course, you can email us on

Now, Damian, in your capacity as an investment wealth manager for people, you cause some property syndicates to occur and to undertake some development. I’d like to talk a little bit about that tonight, and how that works for private investors who might not otherwise be able to access property developments or commercial property. This is a way for them to get in for smaller sums of money.

Damian Collins: Definitely.

Michael Teys: Would you just tell us how that works?

Damian Collins: Yeah, so…well, for most developments of any scale, particularly in the larger cities, generally, you’re looking at a couple million dollars as a bare minimum. And in some cases, a development can be up to $100 million or even more. And same with, I guess, commercial investment property. Trying to find something that’s a half decent investment, you don’t really get it at the small end. It’s typically going to be in that $3 million to $5 million minimum.

And so, for most people, they just simply don’t have that amount of money sitting around. And not only that, it’s a huge risk for someone to put all their eggs, potentially, in that one basket of the one commercial property. Certainly, I’ve got individual commercial properties myself, and they’ve been good investments, but if that was the only investment I had, that one property… I had one of my properties vacant for 18 months at one stage. Now, I had other properties, so it was okay. But if that’s…as an investor…

Michael Teys: If that’s everything you’ve got…

Damian Collins: Exactly.

Michael Teys: …you’re in a lot of trouble.

Damian Collins: Yeah, and so that’s the downside with commercial properties, that much bigger vacancy risk. You can’t always lease the properties out. So the opportunity in a syndication is, basically, people pool their money. Now, obviously, it needs to make sure it’s compliant with the financial services laws. So you need, if it’s a retail one, you need a responsible entity.

Michael Teys: So what’s a retail offer?

Damian Collins: Yeah, retail offer is an offer to the general public where, basically, they’re not sophisticated or wholesale investors. So it means anybody can invest in that particular…

Michael Teys: And what sort of investment sums are typically put into a retail syndicate?

Damian Collins: Generally, 25 is the minimum. Some of the funds are minimum $50,000. So, generally, they’re not as often, unless they’re through financial planning channels, generally, they’re not sort of $5,000 type investments. They’re generally looking for $25,000 to $50,000. And a lot of people tend to use their super funds. You know, particularly if they’re in their 40s and 50s, and they’ve got a bit of money sitting around there. And if they’ve got a self-managed fund, they often use those.

Michael Teys: So when you invest in a syndicate like this, you’re putting your cash in. The debt is already in the syndicate, is it? You don’t, sort of…you’re not borrowing as well to put in.

Damian Collins: No, no. So most likely, you’re going to have that as cash sitting aside somewhere, either in your own name or in your super fund. So then, typically, what they’re done as unit trusts, depending on what the ultimate outcome is. If it’s a commercial investment property for passive long-term hold, generally they’re set up as unit trusts. So the money, all the distributions pass out to the unit holders in proportion to the units they hold, and that’s done and then they’re taxed in the hand of the unit holder. So the unit trust itself doesn’t pay any tax. Developments can go other way, depending. They can be done as unit trust developments to sell. They can either be done often as unit trusts or sometimes they’re done as companies. But the preferred option, generally, is a unit trust where still, it’s a taxable profit, but in the unit holder’s hands. And they can set up their own structures, whether it be their own name or discretionary trusts to suit their own particular circumstances.

Michael Teys: And so, if you’re the promotor of one of these schemes, where does the development profit go? Is it going to go to you? Or does it go to the investors?

Damian Collins: Well, typically, a promotor of a scheme or someone who’s setting those up, will be paid some sort of fees for arranging that. So in the case of what we do, you know, we have our buyer’s agency and we’ve also got a project management division, so we’re paid fees for those services that we provide to the syndicate. And then, obviously, that’s…but, I guess, the syndicate members are developers. And that’s the…if it’s a development syndicate. But the good thing is, as you were mentioning before, the debt is non-recourse to the unit holders. So this…

Michael Teys: So you’re only up for what you put on the table.

Damian Collins: Exactly. You’re not…whereas if you’re developing…

Michael Teys: You can’t be chased for any disaster.

Damian Collins: No. And, of course, that means, generally, the banks, in order to do that, will want lower loan to value ratios, which keeps a bit more conservative gearing, whereas, you know, some developers try to gear up and borrow as much as possible. Because of the fact that it’s non-recourse back to the unit holders, then you find that there’s a bit more capital. So yes, you’re only up for what you’ve put in. If it happened to go pear-shaped or belly-up, there’s non-recourse to the unit holders.

Michael Teys: So the $64 million question is, what’s the rate of return on a development syndicate, and what’s the rate of return on a, say, a commercial property syndicate?

Damian Collins: Yeah, look. On a typical development syndicate that’s out in the market, you’d expect to get more than 20% per annum on your capital invested. So, if it was a two and half year project, you’d be looking at projects with, you know, 50 plus percent returns. You know, they sort of start at 15% to 20%. Ultimately, though, it comes down to the performance of the…

Michael Teys: Risk. And it’s a risk return thing.

Damian Collins: Absolutely. So it’s not…yeah. You get 2% at the bank. You get maybe 15% to 20% on these, but there’s no guarantees with it. Now, on a commercial investment property, it tends to be more a passive investment. So it’s around about 8%, often. And it’s about the going rate in the market for a commercial property. And that tends to be more stable, because it’s a cash return as well, every quarter.

So you’re getting, every quarter, you’re getting effectively 2% roughly, and that should increase over time depending on the lease terms with the commercial tenant. And the development one, you won’t get a return, generally, right to the end until all the units are sold because…

Michael Teys: Yeah, you won’t.

Damian Collins: …the banks take their money first. Unit holders get paid last.

Michael Teys: That’s strange, isn’t it?

Damian Collins: It’s strange. Terrible, isn’t’ it? But that’s what they do.

Nol Petrohelos: I love the banks.

Michael Teys: Now, other commercial property syndicate, are there tax benefits there for investors? How does that work?

Nol Petrohelos: Definitely. Depending on the vehicle that’s holding the property, you know, the vehicle obviously has to have a tax problem. So it’s obviously making money. And we can use depreciation to offset that, along with other expenses like interest and whatever else. The rules are a little bit different for depreciation around commercial buildings. And little things like what I mentioned before the structural elements of the building for commercial, that date is 1982.

So that’s when a lot of that came in. Commercial buildings are built in a unique manner, whereas a residential property, they use a very systematic building style for it to be called, you know, single-story house, apartment blocks, two-story house, and bits and pieces. So the estimating and coming up with that base cost is a little bit more work in it for BMT. But it still works out to be very similar around the 2.5%. Some commercial buildings do get 4% building right-off, so a little bit higher or accelerated building right-off over a shorter period of time.

Michael Teys: And whatever tax benefits there are to investors in these commercial property syndicates just gets trickled down to the investors proportionate to their investment, doesn’t it?

Nol Petrohelos: It really does depend on how they’re holding and how that vehicle is set up. If it’s a company, then sometimes the return is done for the vehicle holding, like the company. And then…

Michael Teys: The unit trust can flow through.

Nol Petrohelos: And the unit trust, it would flow through, yeah, to the beneficiaries.

Michael Teys: Well, there’s another option for our viewers if they’re tired of investing in residential property and want to try something a little different.

Nol Petrohelos: Mm, yeah.

Michael Teys: Then a development syndicate or a commercial property syndicate is another way of accessing a different type of return. And giving some diversity to a portfolio. We talk all the time about investing in different residential zones. There’s also the prospect of investing in a different type of property altogether, a commercial property or a residential development, which is really a commercial undertaking.

Damian Collins: Yeah.

Michael Teys: Not so much residential property itself. So that’s something for people to think about. But always make sure that they’re compliant. These are heavily regulated investments and unless they’re coming with an ASIC compliant document, people shouldn’t touch them.

Damian Collins: Absolutely. You got to read the project disclosure statement. Make sure you understand it or go and seek appropriate advice. And just be, yeah, understanding that you’re not…there is a manager in place so you don’t get rights to make decisions, generally, unless the unit holders all got together and chose to change the manager. Generally, as unit holder, it’s a passive investment so you can have confidence in the managers who are running it.

Michael Teys: Yes. Now, would you say that the predominant number of investors in these schemes are self-managed super funds these days? Seems to me to be ideal for a self-managed super fund, when the criticism of self-managed super funds investing in property is usually that it’s too big an investment, if they’re buying a whole unit or a whole house. This seems to me to be perfect.

Damian Collins: Definitely. We do see a lot of self-managed super funds because for a lot of people that’s their biggest source of wealth outside the family home, particularly if they haven’t, you know, bought investment property before. So, and so yes, there’s certainly a lot of people, particularly in that 45 plus age bracket who have quite substantial balances in their funds. So yes, we do find that they invest in them quite a bit.

The only, of course, downside about a super fund is that it’s…. basically for people in that 45 and under bracket, is the money’s stuck in there, but you can’t get it out until you’re at least 60. But for people a bit older, those rules weren’t in place so they can access their money in the super fund early.

Michael Teys: Yeah, okay. Well, that’s good. I think it’s time for a short break. We’ve got a lot more to talk about and I hope you’ll stay with us. If you’ve got a question, call us now on 1300 30 34 35. We’d love to hear from you. We can answer questions about tax depreciation, and any form of property investment, and my particular area, strata and title property. So email us at property@ You never know, you could also be the winner of the question of the week. We’ll be right back.

Michael Teys: Welcome back to “Your Money Your Call”. I’m Michael Teys. And if you’re just watching tonight, after a couple of weeks you’ll know that we have a new format. We air now for an hour and a half to give you more time to join in the discussion. Tonight, Damian Collins from Momentum Wealth and Nol Petrohelos from BMT Tax Depreciation are here and ready to help you. So call us now on 1300 30 34 35 to join the queue. Or email us on Well, first in the queue, at the moment, is Joel. And Joel, you’ve got a question for us.

Joel: Hi, Michael. Thanks for taking my call and, panel. I listen and watch the show every week on podcast or on Foxtel. It’s great and it really informs me, so appreciate it.

Michael Teys: Thank you. That’s good to hear.

Joel: Now, Michael, it might be a little bit of long-winded question. It’s just regarding…

Michael Teys: You take your time.

Joel: …offset accounts. I’ve just finished a very large subdivision, and I’ve actually sold two of the properties and I’m keeping, retaining one. The settlement’s coming through later this month and early next month. And the investment that would be retained on that third property that I’m retaining there, as a form of investment debt, the settlements sort of come through, actually, clear my principle place of residence debt and also have a retained amount of funds sitting in the offset account.

I was just wondering, in terms of that offset money, whether I can use that to offset the interest on the investment diff. I know I’ve read a lot of Margaret’s books. She says you’ve just got to be careful about having funds sitting against investment debt because it makes them non-tax deductible. Eventually, we’re actually looking to purchase a new principle place and upgrade shortly, so I’m going to be using that as offset funds and also selling down the principle place of residence, and upgrading. However, just for the few months, I was sort of thinking, rather than sitting in a cash-bearing account, have it offsetting some higher debt, which is the investment debt.

Michael Teys: Right, well, that’s very detailed. But Damian, we’re always careful to say at this point, we’re not giving financial advice on this programme. So we’re talking generically tonight about the matters that Joel’s raised about the use of offset accounts. How would you advise someone to use something in those circumstances?

Damian Collins: Joel, yeah, so obviously, we’re not across everything in your personal circumstances, so it’s not personal advice. But generally, offset accounts are best used on non-deductible debt. You want to be making sure that…because that’s, obviously, costing you most out of pocket. Now, you’re in a good situation, based on what you said there, that you actually won’t have any more non-deductible debt.

So in those cases, we use offset accounts for our clients against the investment debt. If they ever think they’re going to use it potentially for personal use again… Now, you mentioned there that you’re going to look at buying another principle place of residence. And you might want to use some of that cash, so I would…I’d be looking at…you’re certainly, again, you know, potentially using that…putting that money in offset account. And so there’s no reason why you can’t do that.

Michael Teys: Okay, great. All right. Well, Joel, I hope that helps. Thanks for calling. Now we’ve got Steve on the line. Steve, are you there?

Steve: Yes. Hi, Michael. Thanks for taking my call.

Michael Teys: You’re welcome. How are you?

Steve: Good, good. Well, just… I was listening to your conversation about depreciation early on in the show. I’ve got an old property that I’ve had for about 20 years, and I had tenants move out the beginning of May. And I had a month of leave and I used the opportunity to put a new kitchen in. I’ve really gutted a lot of the rooms and put new gyprock up, electrical fittings, and basically just trying to do some value-adding

Michael Teys: Mm-hmm, and you did that after the tenants have moved out.

Steve: Yeah, yeah. So, I spent about $15,000. I’ve done a lot of the work myself. Plus used some subcontractors. Now, I’m probably…until tonight, I was just thinking about…and I’ve got about, probably, another $5,000 worth of work to go that I’m hoping to do. I was just going to basically take those receipts to my accountant and just sort of basically claim them, but listening to your guest earlier… As I said I’ve spent about 15, but I think if I would have got a builder or something in to do it, it would have cost me probably a lot more than that. So am I better off getting a depreciation report before I go to my accountant, or…

Michael Teys: All right. Well, let’s see what Nol’s got to say on that.

Nol Petrohelos: Hi, Steve. Thanks for the question. Look, we have to use actual costs when they’re available. It’s, unfortunately, you know, there’s a couple individual rulings on this. And although you’ve put your own time in, we still…. like… there is an actual cost there available and we have to use them. So we just need to look at that $20,000. So the main role that we’ll play here is trying to get… I mean, I’d still recommend getting a quantity surveyor to have a look, purely because a quantity surveyor is a specialist. And they’re going to go in and try and get as much of that $20,000 written off as quick as possible. The more plant and equipment that we can load into that $20,000, the higher the deductions are going to be earlier on.

You know, so another thing you probably should have done, it may be a little bit too late now, is… I’m not sure whether you had an existing depreciation schedule… You have held the property for 20 years, so there wouldn’t be a whole heap left on those particular assets within the property, but if there’s another scenario where you’re doing a renovation that you’ve only held the property for a few years, you really should look at getting a depreciation schedule done before you do the renovation. Because all those assets that you’re ripping out, whether it be old carpet, old blinds, old light fittings, old kitchen stoves, or even the kitchen cupboards if that part of the building qualifies, because you’ve scrapped those assets and they become a loss, the whole value of those assets become an immediate deduction.

So often, you know, on an old property, we might come up with $10,000 or $15,000 worth of old assets that are being ripped out and scrapped. So long as the building was producing income before you do that, you can actually claim that as a loss, and then start to depreciate the new assets that come in. So it’s like a double whammy and a double deduction available. So that’s something to think about.

Will it go over the $20,000? No, that’s the cost to you. And unfortunately, the tax office are quite strict on that. We have to stick to that cost, but we will try to break up the assets to get the…to accelerate that depreciation as quick as we can, especially in that first five years

Michael Teys: It’s not only about the dollar sum, it’s about the timing.

Nol Petrohelos: It’s about the timing, definitely.

Michael Teys: All right, good.

Nol Petrohelos: Yeah.

Michael Teys: A lot of good information there for Steve. So hopefully, that helps make the most of that work that he’s done in that break.

All right, we’ll take our first email tonight. From Mark, and Mark asks, “I live in Sydney but I’m looking for a Brisbane property. I’ve looked into the inner city of Brisbane but it looks oversupplied in the unit market. Do you have any suburbs in Brisbane that you think could have good growth rates going forward for houses?

I’m going to use my self-managed super fund and I’m prepared to buy up to $600,000. I have a commercial property within the self-managed super fund that has already been paid off, and is rented to my business. So there is plenty of cash flow to service any loan.”

All right, gentleman. Well, what do we make of this situation? A few things there: a self-managed super fund, lot of money, $600,000.

Nol Petrohelos: Yeah.

Michael Teys: Advice? Nol, start with you.

Nol Petrohelos: Look, I’m a depreciation guy. I’m not really a location guy. But I am an investor myself, and I do keep an eye on Brisbane. I think Queensland and Brisbane, and sort of the outer ring of Brisbane is…I mean, it’s had…it’s sort of picked up in the last 12 months, but I think it’s still got a bit to go. And probably, as an area, a little bit, you know, Sydney we’re seeing a lot of action in the last two, three years. Melbourne, very similar, whereas Brisbane, not as much.

I think it’s sort of gaining some momentum now. I really like a little bit North, Chermside, close to the airport. There’s some big shopping centres, a lot of infrastructure going on there. Or down through the Brisbane to Gold Coast corridor. Right down from Logan…

Michael Teys: Louis Christopher was talking about that on Peter’s show just before this one, and that’s always been a corridor of…

Nol Petrohelos: Big growth corridor.

Michael Teys: …enormous potential.

Nol Petrohelos: Yeah.

Michael Teys: Affordable houses, lots of jobs, the option of working in one city or the other. Different as chalk and cheese, Gold Coast and Brisbane, but there they are in close proximity to one another. So plenty of choice for people in that area.

Nol Petrohelos: And what I would say is just to think outside the square a little bit and don’t look at one place for $600,000. Potentially, diversify a little bit.

Michael Teys: That was what I was thinking.

Nol Petrohelos: Yeah.

Michael Teys: I mean, $600,000, you could really do a lot with two $300,000 investments still, couldn’t you?

Damian Collins: Yeah.

Nol Petrohelos: Yeah.

Damian Collins: He did mention he wanted…he was interested in a house, which you’d probably struggle unless you went out to the far flungs of Brisbane.

Michael Teys: I reckon I could convert him to a unit person, myself.

Damian Collins: Well…

Michael Teys: I’m pretty good.

Damian Collins: Mark did say he did notice there’s an oversupply of units, which definitely there is in the inner city…

Michael Teys: There’s no doubt about that.

Damian Collins: Inner city areas.

Michael Teys: Absolutely no doubt.

Damian Collins: That’s always one of the things. I’m always hesitant when I…as an investor, and when we’re advising clients, if someone could put a lot more of it out there, which is often happens in a city. I was just down in Melbourne this morning and the dock lands in South Bank, plenty of apartments all through that coming on. And that’s always the risk, so I would definitely steer clear of the apartment market in the inner city.

Some of the areas that we do also, like Chermside, that’s an area we’ve been buying for clients. It’s one of the strategic metropolitan areas that is in the Brisbane plan. Also, on the…bit further on the east side, Nundah is a good one. It’s on the train line. And Mitchelton, on the other side, is again, got good transportation.

Michael Teys: Everton Park?

Damian Collins: In that same sort of vicinity.

Michael Teys: Same sort of zone isn’t it.

Damian Collins: In that area. Look, what I’m finding, our research shows that Sydney and Melbourne, particularly, because they’re much…they’re bigger cities and the premium people pay to be close to public transport increases as the city gets bigger and denser.

Michael Teys: Yes.

Damian Collins: And we haven’t seen that quite as much in Perth and Brisbane. And they’re both 2 million cities looking to grow to 4 or 5 million over the next 30 years. I think, in those cities, we certainly favour being in good proximity to public transport, because as the cities get more congested and denser, people will pay those premiums to be close to train stations. So there are our tips, and I think I’m with Nol, I think Brisbane is probably the best set market in the next couple years. Now, you don’t want to just buy in the next three years plus, because often, if it’s an area that’s going to get three years’ growth, it’s not enough. You want to be able to get 10 years. But I still like Brisbane, 10 years, as well as 3., so that would be our top pick, and I think the market is heading up, though. There’s, you know, quite a bit of activity. We do often… we’re buying for clients there and we do often get outbid. So you’ve got to be… you know, I’d recommend getting a buyer’s agent to help him. Particularly if he lives in Sydney, he’s going to struggle to buy, particularly when he’s in a remote location.

Michael Teys: And a buyer’s agent is going to charge, obviously, the buyer a fee?

Damian Collins: Yes, definitely.

Michael Teys: Is that going to be worth it? Not just in terms of time, but also in getting a better price?

Damian Collins: Well, definitely. Certainly, negotiation, a buyer’s agent can add value there. Certainly, they’ll, hopefully, be more in tune with the market and the agents. We find that selling agents like to share a bit more information with a fellow agent, as a buyer’s agent, than they would do, necessarily, with someone directly. But it’s also choosing the right area. So, we’ve mentioned a few suburbs tonight, but, you know, if you’re going to go into another city, and you don’t know it, how are you going to choose the best areas?

You know, we’ve certainly, in our office, spent hundreds and hundreds of hours researching the Brisbane market. So someone going to another city, you’re certainly taking a big risk by doing that without having someone on the ground who actually knows the market and knows what to do. So, I would certainly recommend anyone going interstate, not in their own town, would be worth using a buyer’s agent.

Michael Teys: What I would say, in relation to our last question, that we probably need to be a little bit careful with the self-managed super fund having such an exposure to property? There’s a commercial…an unencumbered commercial property there. And looking at a $600,000, we of course, don’t know the size of the self-managed super fund, but I do think we need to keep that in perspective.

I also think we need to keep in perspective that government regulators, I’m certain, are going to look very carefully at how much property is going into self-managed superannuation funds. I don’t think there’s any concern about that being retrospective, but it certainly would be a concern, I think, to them if they were getting too heavy in property. So just be mindful of those things.

All right. Well, thanks for tuning in. It’s time we took a short break, so I can have a bit of a cough. But when we return, you’ll have another chance to get hold of a copy of Margaret’s new book “How to Achieve Property Success.” But you’ll have to ask a question and have it selected. So simply call now on 1300 30 34 35 or you can email us on

Michael Teys: Welcome back to “Your Money Your Call”, where we’re now taking your calls and answers for the next 45 minutes. I’m Michael Teys, and joining me is Damian Collins from Momentum Wealth and Nol Petrohelos from BMT Tax Depreciation. I’m sure you also have a question for us, so grab the phone and dial 1300 30 34 35 or email us on Now, we have a caller on the line, Angela. How are you?

Angela: Good, thank you.

Michael Teys: Good. How can we help you?

Angela: Hi, I have a question for the panel. I have an investment property that is managed under a buddy corporate lease, part of a buddy corporate. The executive committee decided to use part of the sinking funds to paint the building. And now, to pay back the money into the sinking fund, we are paying an extra levy. I just want to know if that money, that extra levy that I have been paying for a year, can I claim that in depreciation?

Michael Teys: All right, good.

Angela: Thank you.

Michael Teys: All right. Well, a buddy corporate, of course, raises money and puts that to a sinking fund, or a capital works fund. It’s a form of saving so that they have money to spend on recurrent issues. But when something needs to be…when it’s more than repair and maintenance, when something needs to be renewed or replaced, it comes from the sinking fund. In the case of painting, I guess painting the whole of the building, Nol, that’s a capital item. Does the levy, therefore, become deductible?

Nol Petrohelos: Yeah, if the individual has contributed to that painting, then that…based upon their percentage of ownership, the unit of entitlement usually dictates that. If their accountant deems that to be a capital improvement, then we’re happy to include that in their depreciation.

Michael Teys: So the unit of entitlement is going to be used to strike the levy.

Nol Petrohelos: Yes.

Michael Teys: So it’s going to be the amount.

Nol Petrohelos: So, the portion…

Michael Teys: The net effect is it’s the amount of the levy that’s going to be deductible.

Nol Petrohelos: That’s right. And because some special levies are raised for repairing, and therefore, they’re written off as a levy, an expense, that complete amount. But if you’re talking about painting a whole building, it’d be tough to say it’s a repair. You’re probably improving and therefore, it falls under the capital improvement or the capital works allowance. Unfortunately, painting is one of those things that the ATO deem to be part of the structural elements of the building, or fixed to the building, 2.5% per year of that. It’s not a whole heap of money, but that’s the way to claim it, strictly speaking.

Michael Teys: But it still makes the important point, doesn’t it, that just because you’re in a buddy corporate or a strata organization of some sort, these rules still apply.

Nol Petrohelos: They do, yeah.

Michael Teys: And there’s…you’re an owner of the property.

Nol Petrohelos: That’s right.

Michael Teys: There’s money to be made out of the depreciation.

Nol Petrohelos: Yeah, it’s one…we see people miss it all the time. And, you know, when we do a depreciation schedule on a unit complex, we will go through the whole building. Right from the driveway, you have a percentage of ownership over that driveway. Even if there’s some bollard lights on the driveway, you know, right through to a lift, gymnasium, swimming pool, equipment.

We’ll capture as much of that as we can and include it in the depreciation schedule. Another good thing is, because often, the percentage of ownership is quite small, they’ll qualify for some of the little depreciation, the legislation depreciation tricks that allow us to increase the rate of depreciation. And that’s like a low-value pool for assets under $1,000. It’s not really the asset, it’s the interest in the asset. And then, there’s the immediate write-off, less than $300. So, if their interest in that asset…

Michael Teys: Oh, that’s very interesting.

Nol Petrohelos: Yeah, is less than that amount, it qualifies those assets. And the same goes when you have multiple owners. You know, like a husband and wife owning a property. It’s about the interest that qualifies for those particular accelerated depreciation rules.

Michael Teys: So in a very big building, that’s going to be…

Nol Petrohelos: Well, a big building, you’ll see a whole heap of assets there that’ll have a value of less than $1,000. All of those assets qualify for the low-value pool, and therefore, are written off at 37.5% rather than their normal effective life, which might be, you know, 6% or 7% or 8%, based on the normal effective life.

Michael Teys: All right. Well, thanks for that. To another email. This time from Maureen and Matthew. Their email reads, “My son and I have a three to four-bedroom house in Boronia Heights, Queensland, which we’ve held for 10 years. It’s on a 660-square block and it has not appreciated greatly over that time. We’re wondering if we should sell it now, renovate and sell, and purchase something else that will have more capital growth over the next five years, or hold on for a few more years.” All right. A sad tale.

Nol Petrohelos: Yeah.

Michael Teys: A sad tale. A property held for 10 years that hasn’t done much. What do we know about Baronia Heights that’s caused this malaise.

Damian Collins: Well, it’s in the outer suburbs of Brisbane. It’s in the South-West part of town. And Brisbane, overall, hasn’t had a particularly strong run, particularly since 2008. The last seven years it’s really only done CPI inflation. So overall, Brisbane hasn’t performed particularly well. And I get a lot of those. I don’t know if they purchased a house and land package, or what they bought out there, but I’m guessing, just by the sound of it, that sort of block size, it possibly was something like that.

And a lot of, you know, developers and property spruikers like to push that sort of stuff out in the far-flung areas. But they don’t always make the best investments, particularly if there’s a lot of other supply coming on. That’s the risk. And there is, you know, certainly a supply risk around that area. It has been. That’s why it hasn’t done particularly well. One of the questions was should they sell it, renovate it?

Well, that’s a question we can’t answer because we don’t know enough about what they’re planning to do and what the added value might be. Certainly, if I was going to spend, you know, $20,000, I’d want to get, at least, add $40,000 to it. And a lot of mucking around with that, a lot of messing around. You could have a vacant property as well.

Michael Teys: It’s not generally a good idea, is it?

Damian Collins: No. So look, there’s possibly not going to help them. Look, I think, overall, the Brisbane market’s going to improve. And as we said earlier in the show, that’s where we think it’s going to be the best location. But I think you can do better than Boronia Heights. Obviously, you need to take into account your tax consequences. You’re going to have the stamp duty again, unfortunately, when you buy.

But in our research, we’ve looked at it and it only takes a few percent a year outperformance in a better location. In a couple years, you’ve generally made up those costs, if you don’t have a big capital gains bill, which they generally won’t. So I’d be looking at some of the other suburbs. But go and talk to your accountant first, just find out what your tax bill is.

Michael Teys: Yeah. Nol, what do you think of Boronia Heights

Nol Petrohelos: Look, Boronia Heights, as we said before, it is in that corridor that’s seeing a bit of growth. But that is a, you know, a sad story. They’ve followed all the rules and they’ve gone in long-term, 10 years, and haven’t seen a whole heap of growth. Look, it’s a really difficult one. I think there’s, you know, around those areas, there’s growth coming. But at the same time, it hasn’t had a great history. So, you know, there are probably better options out there.

But it’s the kind of thing, you know, me personally, I can’t give a whole heap of advice on, other than that there will be costs in letting go of that property, in agent fees, in transferring that through to another property. What Damian said, speak to an accountant because they’ll be…depending on your tax situation, it might be better off just letting it sit there and tick away for a little bit longer.

Michael Teys: I think so, too. I mean, if I’d bought something in Brisbane that, as you say, hasn’t had great run since 2008, you might have been sitting through the worst of it. And then, just miss a little bit. It’s also possible that you could look at what equity you have there, and use that as security for something else rather than selling. So, perhaps hold. But, you know, it’s a difficult one.

Nol Petrohelos: And depending on their situation, if they’re desperate, I’d say, as Damian said, look at something else. But I agree, Michael. I’d be giving it a little bit longer.

Michael Teys: All right. We’ve got time for a quick email before our next break. This comes from a person who says they’re looking at buying their first property on the Central Coast, at the end of the year, which will be a principle place of residence. “However, I’d like to place a tenant in the property for a few years. What are your thoughts on this strategy and the Central Coast market?” Let’s just do it quickly, with the Central Coast market. What do you say?

Damian Collins: Well, look. It’s certainly getting the spill-over effect from Sydney, and as we said earlier in the show, that once it becomes too expensive to live in Central CBD, and even most places now in Sydney, that you certainly see that ripple effect out there. So, I think the Central Coast will benefit from that over the next…

Michael Teys: It’s a bit hard to get a park out there.

Damian Collins: Is it?

Michael Teys: Never get a park in Central Coast when I go to visit Margaret.

Damian Collins: Terrible, yeah.

Michael Teys: Terrible.

Damian Collins: So, yeah, look. I think as long as the Sydney market is running strongly, that’ll continue to do okay.

Michael Teys: Yeah, Nol, what do you say about the Central Coast?

Nol Petrohelos: Look, exactly what Damian said. The spill-over, in the last 12 months, it’s jumped. And I think it’s still got a bit to go, because of that spill-over from Sydney. So I think it’s good. And look, I really think it’s a good strategy, a way to get into the property market, to make your first home an investment. I think more people should be doing it. Just be careful, because you’re mixing two separate strategies.

They’re looking, you know, they’re looking for a home, which has a whole different set of criteria, potentially, in the long-term, and an investment. Really, you should be looking at numbers and performance of that investment, and drivers in the area, what’s going to push the growth of that area. And they’re really two separate strategies, and you’ve got to be careful blurring that because you’ll end up with a mixed outcome.

Michael Teys: But it’s often the first-timers sort of wish and desire. But they’re going to outgrow that.

Nol Petrohelos: That’s right. And as a way of getting in the market, with the investment, you’ve got the extra tax deductions. It’s a good way to get in the door.

Michael Teys: I was looking at the figures of the number of people between the age of 33 and 43 that aren’t owning a home at the moment, but are in the property market. It’s really, really growing. Very, very substantial trend for us to take account of.

Nol Petrohelos: It is.

Michael Teys: Well, it’s now time for us to take a very short break. But when we return, you’ll have another chance to ask your questions simply by calling us on 1300 30 34 35 or emailing us on

Michael Teys: Welcome back to “Your Money Your Call.” I’m Michael Teys. And with me on the desk tonight is Damian Collins from Momentum Wealth and Nol Petrohelos from BMT Tax Depreciation. We still have time left for you to call and get in for a comment or question. You may even be this week’s book winner. So call now on 1300 30 34 35 or email us on

Before we take another caller, though, in news this week. The New South Wales government has surprised many in the strata sector with new legislation, all drawn up and ready to go. The major reform of which is a compulsory sale of a whole strata block if 75% agrees. This represents a major departure from the sanctity of title for residential property.

Gentlemen, I was wondering about this this week, and I was thinking how that’s going to affect people and their perception of buying a unit as a home, compared with a house with a white picket fence. What do we think about this reform?

Damian Collins: Well, I know where you’re coming from. You talk about the sanctity of title, but even in that, we still have that…

Michael Teys: My castle.

Damian Collins: Yeah, we still have, though…

Michael Teys: You can’t take it away from me.

Damian Collins: They can. The government can compulsory acquire.

Michael Teys: They can, yeah.

Damian Collins: And I guess, in this situation, particularly with the bigger cities around Australia, you know, getting more congested and they need higher density and more density. Well, under these old strata premises, you might have 6 or 8 or 10 units in locations where it not might now be suitable for 30, 40, 50 units. And so, from that perspective, I guess it’s for the greater good. And what you will find, though, is that some people…I mean, people are going to get paid more than what it’s worth individually.

Otherwise, it’s not going to stack up for…you know, no one’s going to sell out. What this is all about is, let’s say your individual units were, say, $800,000, but a developer wants to come along and develop it. He might be willing to pay $1.2 million. It’s stopping that one or two holdouts in a complex from, I guess, stymieing everyone else’s to take that and move on.

So, people, I guess, yeah, you may lose…may end up losing their property, but they’re going to be, certainly, it’s not going to work. And the 75% aren’t going to agree unless the market price, the price they’re paid is more than market anyway. So, I think, ultimately, for the greater good, we do need this.

Michael Teys: Now, what if one of those two people holding out is your mother and she really likes living there, and she doesn’t want to go anywhere?

Nol Petrohelos: That makes the situation a lot harder, Michael, if it was my mother. Look, there are going to be people that are going to be in difficult situations here. I’m a short-term pay and long-term gain sort of person. But I’m also pro-choice, so those kind of conflict with each other.

Michael Teys: You’re very confused. You’re very confused.

Nol Petrohelos: I’m a little confused. Look, I don’t like seeing some of these old buildings sitting there and doing nothing. And I think a little bit of encouragement to do that, to develop and improve these buildings is a great idea. We’ve got, you know, housing shortage problems, supply problems, and getting good quality stock on the market should be seen as a priority for the government.

But there’s going to be this scenario where someone’s…it’s been their home their whole life and I really don’t know. It’s a hard one. Overall, I probably tend to say I agree with it. I think that it’d be good to see a lot of those older buildings prettied up and creating an extra stock, but…

Michael Teys: Look, on balance, I agree with it, too. I’ve been a proponent of this for nearly 20 years. And I think it’s a good concept. What I think the government’s done particularly well with the exposure draft that we saw last week, is to provide a lot of protection for people. So, it’s not just simply a matter of the resolution of 75% and the others are out. The resolution to 75% gets you to a status where you can then make an application to the Land and Environment Court for the plan to be proceeded with.

So the Land and Environment Court is going to make sure that those that aren’t in favour initially are properly looked after and respected, the tenants are looked after, that people are given adequate time and adequate notice. So I think the detail around the process is quite complex. It’s not going to be an easy process for developers to pull off, so we won’t see a flood of them.

But I think where people are determined to do it, and where it makes eminent sense for the owners of the property, for the proponent of the scheme, and for the urban environment, then this is a way of proceeding and giving people protection with a court overlooking the process, so that people don’t get treated badly. I think it can work. But it does mean that when you buy into a collectively owned property, it’s not quite the same.

I think people need to take that into account when they buy. They’re going to continue to buy under strata title property, frankly, because many aren’t going to have any choice. But it is different, and those laws are going to help, I think.

Damian Collins: Well, I think you’re going to find, though, they’re going to be on the older style ones. They’re not going to be…

Michael Teys: Quite.

Damian Collins: They’re not likely to be…

Michael Teys: This is not happening in something new.

Damian Collins: Yeah, it’s not likely to happen in anything that’s less than 10 years old on that term. Highly unlikely, so yeah. Overall, on balance, it’s laws, I think, we need. But, and let’s just say I don’t…it’s not going to happen every property, and to get that 75% to even agree the price would have to be pretty good to get that. So, I think, ultimately…

Michael Teys: Which I have seen…

Damian Collins: …people will…

Michael Teys: I have seen, in Sydney, just in the last couple of weeks, a particular building that we’ve been managing where a developer has come in with an extraordinary price. And all of a sudden, you know, Nol’s mum, she’s pretty happy to be going. She’s just picked up a big check.

Nol Petrohelos: And she’s going for the view somewhere.

Michael Teys: Yeah, she’s out, gone. She’s on a cruise. So, it’s been a good news story. So, there’s some other reforms in that package, which I think are significant as well. A 2% levy on builders and developers, which has got to go towards defects, to be held over a two-year period. I think it’s good that the issue of defects is being addressed, because it’s terrible. There’s bad defects in new buildings everywhere, particularly in Sydney.

The Institute of Engineers has come out at last. Someone credible has come out and said that private certification is bad and it’s, perhaps, it’s worst in New South Wales than anywhere. So, New South Wales, responding with a 2% building bond is an interesting concept. Although, my concern about this is it’s actually the unit owner that’s paying. The builders and the developers won’t be sitting at home tonight going, “Oh, shucks. We just lost a couple of percent.”

They’ll be thinking of ways to add that to the price, probably add 5% and tell the people that is was a government initiative. So, consumer protection always comes at a cost for the consumer. And so, I think, what we’ve really got here is a scheme where it’s almost a forced saving scheme. When you buy a unit now, you’re going to be putting away a bit of your own money to pay for the defects.

The only way that we’re going to get cultural shift on defects is to change the certification system and the way in which people are undertaking buildings. Because it’s just appalling what people are serving up. I don’t know whether you’re seeing it in Perth. I mean, but the standard of the buildings being delivered in Sydney and Cambra [SP] at the moment is just woeful.

Damian Collins: Yeah, I think it’s just a function of there’s a lot of demand out there, and the builders and developers are getting away with second-rate projects. But look, I think the 2%…the problem, I guess, it goes back to is there’s no insurance in a…certainly, in a house.

Michael Teys: In a large building.

Damian Collins: In a large building, there’s no insurance for defects, insurance. Whereas, in a single house there’s, you know, depending on which state you’re in, often, there’s six-year structural warranties that have to be given. So, because they couldn’t get the insurance, or it was too prohibitively expensive, they dropped it. And then, of course, the second-rate construction came in. And look, it’s interesting. From the proposal, it seemed to be levied on the developer. And as you say, well, the developer’s not the builder. So, they’re just going to…

Michael Teys: Just get passed on.

Damian Collins: They’re going to…you know, it’s just going to get passed on. And ultimately, for their protection, the consumers are going to pay it themselves.

Michael Teys: That’s right. And, you know, that’s just the way of the world.

Damian Collins: Yeah.

Michael Teys: I’m chairing a meeting tomorrow night in Sydney, where people have bought into a new building. The building was worth $58 million when it was sold a year ago. And they’ve got a bill for defects of $15 million. Fifteen million, that’s $100,000 a head. And, you know, it’s dreadful problem. You know, we can’t…the sector can’t let that continue to happen.

Damian Collins: No.

Michael Teys: It’s an absolute disgrace.

Damian Collins: And I guess it’s just a lesson for people buying and, you know, particularly in Sydney, at the moment, where, you know, whole complexes are selling out in one day. You need to be going back and doing your homework. Who’s the developer? Do they have a reputation to protect? And who’s the builder on these projects? Do these people have reputations that they need to protect, and they’re going to do a good job? Because there’s a lot of stuff out there. People just buying anything and not thinking about all those things that might come to fruition in the years ahead.

Michael Teys: All right. Well, in other news this week, concerning strata, I’ve decided to take on five franchisees for my strata management business, “Block Strata.” So if you think you might want to be part of that, part of the fastest growing property sector there is, and certainly the way of the future, then contact me now at, and I’ll make sure that we get an information pack sent out to you right away.

Well, we’ll take an email now. We’ve got an email from Tom, who asks, “I have a super fund that myself and my wife are trustees and members of the fund. In New South Wales, this fund is up to the threshold. We also have a principle place of residence in New South Wales. If we wish to purchase another investment property in New South Wales, could this be purchased in my wife’s personal name and avoid land tax, provided it is below the threshold, considering she is a trustee and member of the super fund? My wife has no taxable income.” Damian, let’s start with you on that one.

Damian Collins: Tom, my understanding is that in New South Wales, and it varies across different states, is that your super fund would be treated separately to yourselves as individuals. And so, in that particular case, you may get a threshold exemption. But look, it’s obviously an important decision. If you get hit with, potentially, 1.6% taxes, it is in New South Wales. That could be another $6,000 or $7,000 a year. So I’d be going to speak to someone in the know about that, a property lawyer or a property tax accountant, who’s familiar with New South Wales land tax.

Michael Teys: I think you’re right on that point. It will be different. They regard it as a different entity. And then, the husband and wife can then also hold property separately. So there’s three entities there…

Damian Collins: They can get the threshold.

Michael Teys: …that can hold property. I think the question is, is that too much property in New South Wales? Is that too much property? And if that’s all the property you’ve got, you know, there are other options. You know, sometimes, people in New South Wales forget there are other states. Quite a few of them. And it might be that there’s some other investment to be had. We were talking earlier about the Sydney market and the Melbourne market. What about the rest of Australia? We’ve talked a little bit about Perth. Anything happening anywhere else that people need to be on?

Damian Collins: No, I stayed in Melbourne on the weekend, and that, particularly the inner east and suburbs is going almost like Sydney. It’s very buoyant and…

Michael Teys: It’s crazy isn’t it?

Damian Collins: …property is going 20%, 30% over reserve. Not as buoyant, still strong, but not as buoyant when you get a bit further out. But look, I’d be avoiding Melbourne now for an investment for, I think, again…look, no one knows when the music is going to stop. And it’s still…but I remember, very clearly, in Perth, in 2007, when the music stopped, it stopped very quickly. And it doesn’t take a lot.

And then all of a sudden, people notice no one’s buying anymore and it can happen very quickly. So, I think it’s going to be sometime this year in Sydney and Melbourne, but who knows the exact date. And so, getting it this late stage is when people make the biggest mistakes and they could be in a situation where, I wouldn’t be surprised if 2020 the prices in Sydney are much the same as…particularly if you’ve overpaid, that in five years’ time, you might be sitting with something that hasn’t grown in value at all.

Michael Teys: That Boronia Heights….

Nol Petrohelos: Yeah, 10 years.

Michael Teys: …tragedy we were talking about before. All right. Well, thanks for tuning in. It’s time for us to take a break, but when we return we’ll be answering more of your questions and those emails. To have them answered, simply call us now on 1300 30 34 35 or email us at

Michael Teys: Welcome back to “Your Money Your Call.” I’m Michael Teys. We’ve had a great night with our panel, Damian Collins from Momentum Wealth and Noel Petrohelos from BMT Tax Depreciation. Our lines are closed for tonight, but we have time for a question from our last caller, who I think’s name is Michael. Hello, Michael. How are you

Michael: I’m good. Thank you.

Michael Teys: Good. How can we help you tonight?

Michael: Yes, hi. I’ve got a property, an investment property I did some renovations on in 2012 and 2013. And I didn’t claim the full depreciation from it at that time. I just want to know if I can still do it now. And if I can, how do I go about it?

Michael Teys: All right. Okay, well, you’ve asked on the right night, because Nol’s going to give us an answer to that right now. Nol?

Nol Petrohelos: Yes, Michael, definitely you can go back and claim that. So, every time that BMT does a depreciation schedule, we actually start all schedules from the settlement date, when you became the owner of that property. And we project it out. Now, a little unknown fact is that assets depreciate whether the owner claims it or not. So, basically, the concept, the fundamentals of depreciation are that the assets wear out over time.

Now, even if you have a primary place of residence, the assets are still wearing out. You just can’t claim them. So, in your scenario, you’ve done some work. As long as the work is a capital improvement, and not classified as repairs and maintenance. Now, repairs and maintenance are things that you’re basically bringing back to the state that it was when you purchased. You claim that directly with your accountant, as long as the building was income producing.

Whereas depreciation, you’re actually adding to what was there. And so, if you did anything that first 12 months, that would be difficult to claim it as repairs and maintenance. But so I would set up the schedule to start from when you purchased. It’ll calculate each year, and what you’ll see in the year that you did those renovations, you’ll see additional assets pop into that schedule, and the deduction down the bottom there increase because of those extra assets. So, we’ll backdate it.

Just make sure you get to your accountant this year, when you’re doing your tax return, and include those in there. Because the tax office can be a little bit funny sometimes about going back and amending previous years. They’ll usually only allow two years. So make sure you get it in this financial year. If there’s been any special circumstances, the tax office will sometimes let you go back a little bit further, but you really need to put a bit of a case forward for that.

Michael Teys: Okay, what sort of special circumstances might that be?

Nol Petrohelos: Well, we’re seeing the HEO let people go back to, you know, as far as seven or eight years because they’ve been out of the country, they’ve been caught in some predicament outside of Australia and they couldn’t actually do a tax return. And they’re able to go back and amend. We’ve had people with ill health. Under special circumstance, you know, they haven’t done a tax return for a period of time and they’re able to go back and amend. If you just call up and said, “I forgot to do my depreciation,” or your accountant does that, it’s probably not going to cut it.

Michael Teys: Not going to cut it.

Nol Petrohelos: You’re probably going to end up only getting that two years. But you can get that two years, and it’s two additional years back. And they’re basically amended assessments. So you’re doing your current year, and you’re basically going back and amending those assessments from previous years, including those deductions that you missed out on. And unfortunately, we see it happening all the time, and it’s purely because depreciation’s one of those deductions, it’s a non-cash deduction.

There’s no receipt. There’s no money going out. It’s there to be claimed, but because there’s no actual paper trail for depreciation, people sometimes miss it. And unfortunately, when you’re missing out, that’s missed money in your pocket. And they realize they’ve got to do it, and then all of a sudden, they’re like, “Oh, I can’t go back and claim,” you know, if it’s been five, six years. They’ve missed out on, you know… Average depreciation schedule for residential property, somewhere between $7,000 and $12,000 per year as a deduction.

Michael Teys: It’s heartbreaking.

Nol Petrohelos: Yeah.

Michael Teys: Well, Michael, it sounds like you may have called just in time. So, with that advice, I’d go and see someone straight away and get that fixed up. All right, we’re going to take an email now from Anne. And Anne asks, “I’m building my property portfolio and would appreciate your advice on how to find an accountant proficient in property investment tax.” All right. Well…

Nol Petrohelos: There’s one right here.

Michael Teys: There’s one here. Well, an ex…

Damian Collins: Reformed accountant.

Michael Teys: A reformed accountant.

Nol Petrohelos: Oh, that’s right. He’s reformed.

Michael Teys: Accountants with expertise in property, not that common.

Damian Collins: No, they’re not, Michael. And I think it’s, you know, a lot of accountants would do, you know, clients of all different spectres and spheres, and all sorts of different businesses. And I find that, in a lot of cases, if it’s pretty basic sort of property tax, most accountants can do it. But, yeah, things like depreciation, I’m sure Nol sees it., some accountants wouldn’t even recommend depreciation reports, whereas I would certainly recommend getting them. So I think the best thing for Anne would be is, you’ve really got to ask the questions. You know, what is your specialty? So, without going there, say, “I’m a property investor…”

Michael Teys: Yeah, can you help me?

Damian Collins: Can you help me? They’ll say yes. Go in there and say, “What is the areas that your firm specializes in and where you can help people?” The other thing would be to talk to other property investors and see if they’ve got a good accountant.

Michael Teys: I’d be talking to a property manager.

Damian Collins: Yeah.

Michael Teys: And saying, you know, “Can you tell me where your two or three best investors are getting their accounting advice from?”

Damian Collins: Yeah.

Michael Teys: Because there’s really, you know… My travels around the country, you find accountants that, you know, are very focused on the share market, very focused on managed funds. Property just, you know, it’s just not their thing.

Damian Collins: Yeah, for a lot of them, it’s not necessarily their thing. And yeah, I think you’ve got to get that referral. It’s… find out who are other people using, whether it’s from people you know yourself or property investors, or talk to your property manager. They might be able to find out who their best clients are using as well. And yeah, definitely a referral is probably the best place to be looking.

Michael Teys: Yeah. All right. Well, we should also mention our good friend Ian from Bishop Collins.

Nol Petrohelos: Ian Rodrigues.

Michael Teys: Ian Rodrigues, who I think is an excellent accountant. So there’s a free plug for Ian. We’re going to take another email. And this one comes from Harshal, who asks us, “What do you think of investing in Brisbane Skytower, located in the business district of Brisbane. It’s state of the art complex built as the tallest residential complex in Brisbane.” All right, well, without wanting to rain on the parade of Skytower in Brisbane, I don’t think we’d have much good news for the developers of that. What do you say?

Damian Collins: No, and we were just talking earlier in the show about the looming oversupply in Brisbane. And that email sounds like he’s selling it to himself, unfortunately.

Michael Teys: It really does, doesn’t it?

Damian Collins: It’s selling it back to himself. So, look. There’s a looming oversupply of apartments. It doesn’t mean that the rest of Brisbane won’t grow, but those apartments are likely to underperform.

Michael Teys: Right. You know, I’ve made a real study of these mega towers over years, Q1, Eureka. Not so much, I’m going to leave Eureka out, in Melbourne. But if you look at the Gold Coast, Q1, Sol, Circle on Cavill, big developments. And they all were built. They were left with unsold stock. The developer went broke. The receiver came in. The first thing they did was whack 25% off the price, and then another 25%. And it’s going to take people 10 years to get over that.

Damian Collins: Yeah, 10.

Michael Teys: A good 10 years.

Damian Collins: Yeah, exactly.

Michael Teys: So, you know, you and I have disagreed from time to time about whether or not the value is in the land or in a unit. But I think in the case of the mega towers, it’s definitely an oversupply risk. It’s an internal oversupply.

Damian Collins: And look, with those mega towers, as you say, you know, they’re branding it. This is the tallest this or the biggest that. And they are…

Michael Teys: So what?

Damian Collins: Yeah, I know.

Michael Teys: So what?

Damian Collins: Exactly. They’re spending a lot on marketing. They’re probably charging premium prices. And they are very expensive to build, as well, when you get up to certain height levels. So, look, all around, I would just say, look, I think you can find better places for your money in Brisbane.

Michael Teys: Yeah, lots better there.

Nol Petrohelos: One positive note, the depreciation on those mega towers are quite good. Because there’s just lots of assets in the common areas. But, yeah, I mean, they’ve had a bad history, I guess.

Michael Teys: All right. Well, thanks, gentlemen. That brings us to the end of our show. Margaret will be back next week with Rich Harvey of Property Buyer and Simon Pressley of Propertyology. Thank you to our panellists, Nol Petrohelos from BMT and Damian Collins from Momentum Wealth. Always good to have you on the show, gentlemen.

Nol Petrohelos: Thanks, Michael.

Michael Teys: Thanks also to our callers. And this week, the question of the week goes to Colin, from Geelong And you might recall that Colin had a question about Port Macquarie. So, we hope that you enjoy Margaret’s book and that it helps you on your investing way. If you can now email me, Colin, on, I’ll make sure that the book gets sent out to you.

You can follow me on Twitter, @michaelteys. And don’t forget that I’m looking for just five quality partners for my franchise strata management business in Sydney. So email me at if you think you might be the one. Thanks for being with us. I’ll see you again in a few weeks.

Voiceover: Announcer: The information featured in this program is general in nature and therefore should not be relied upon. Guests appearing on the program may have commercial arrangements with some of the companies mentioned. Before making any investment, insurance, or financial planning decisions, you should consult a licensed professional who can advise whether your decision is appropriate for you.



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