Promoted by Capital Claims Tax Depreciation
Both founded in 2013, the National Disability Insurance Agency (NDIA) is an Australian Government organisation whose purpose is to implement and manage the National Disability Insurance Scheme (NDIS). The NDIS supports people with a disability, their families, and carers by providing approved funding.
In 2022, the Australian Government released the NDIA's 20-year projection model, which pledged $5 billion to people with a disability and estimated that by 2042, at an average growth rate of 2.4% per annum, 36,684 homes will be required, and this is how Specialist Disability Accommodation (SDA) came to be.
Out of these funds, and up until 2032, the NDIA, is providing the NDIS, $700 million per year, to develop SDA housing for eligible participants, ensuring that individuals with disabilities have access to safe, secure, and suitable accommodation.
For property investors, the significant increase in SDA developments needed provides an investment opportunity, backed by government funding.
SDA Housing Explained
Specialist Disability Accommodation (SDA) is an innovative type of housing designed specifically for individuals, known as Participants, with extreme functional impairment or extremely high support needs, and aims to provide better living conditions. SDA properties are therefore built to accommodate the unique requirements of their residents, offering accessibility features, assistive technology, and around-the-clock support.
Eligibility for SDA housing is determined by the NDIS, and after approving a Participants plan, funding is released directly, to an SDA Provider to manage the construction and maintenance costs of said property.
Currently, there is a severe shortage of suitable accommodation, and as a result, the Australian Government has appealed to private investors, highlighting higher than average market rents and potential for long tenancy periods.
How SDA properties differ from standard investment properties
Building to SDA Design Standards typically cost more to build than building a standard property due to features like wheelchair accessibility, reinforced walls, ceiling hoists, assistive technology, widened doorways, level entryways, accessible bathrooms, and adaptable kitchen layouts.
The below table illustrates that even though SDA properties have the same basic structure and assets of a standard property, they are far from that. SDA properties have many additional structural works, alongside significant additional plant, and equipment requirements.
| Category | Residential House | Specialist Disability Accommodation |
| Division 43 Capital Works | Basic structure of building: | Additional requirements: |
| Walls | Reinforced structural components | |
| Roof | Ramps | |
| Joinery | Door widths | |
| Fences | Over-sized car spacing | |
| Garages | Larger wet areas | |
| Decks etc | ||
| Division 40 - Plant and Equipment | Basic property assets: | Additional requirements: |
| Hot water system | Specialised equipment | |
| Air conditioning | Home automation | |
| Kitchen appliances | Adjustable benches | |
| Carpet | Communication monitoring | |
| Blinds | Zoned air conditioning | |
| Light shades etc | Fire services | |
| Lifts and hoists |
SDA property investors do face higher construction costs, however this also means that the tax deductions claimable for those costs over time as they depreciate is also substantially higher.
The benefits of investing in SDA housing?
Investing in SDA housing has the potential to offer a stable income, exceptionally high yields (ranging from approximately 10% per year to an impressive 20% per year) government-backed income, long-term tenancies, the chance to make a positive social impact by providing essential housing for people with disabilities and ability to claim significant tax deductions for depreciation.
What is investment property Tax Depreciation?
Tax depreciation is typically one of the largest tax deductions for property investors after interest and is often overlooked by property investors. Engaging a quantity surveyor who is a tax depreciation specialist is crucial in ensuring you claim all legitimate entitlements and deductions.
Depreciation is an accounting term that refers to the ageing and wear of an asset over time. Even if an investment property appreciates (goes up in value), from an accounting perspective and in the view of the Australian Tax Office (ATO), the building and included fixtures and assets still wear out and diminish in value over time (they depreciate). This loss in value each year is claimable as a tax deduction under both Division 43 and Division 40 claims.
The tax depreciation deduction is applied against the property's income in the same way that other property expenses are e.g. borrowing costs, property management fees, repairs and maintenance etc. A tax depreciation schedule will calculate and forecast the depreciation deductions claimable for an investment property and is a one-off purchase that can be used and applied each year by the investor.
How the rules of Tax Depreciation apply to SDA properties
SDA property investors are entitled to claim tax depreciation deductions, and those deductions can be quite substantial as seen in the below case study.
The improved position annually figures illustrate, that claiming tax depreciation will improve the annual net cash flow for an investor by $18,148, in the first full financial year of deductions.
Case study - SDA 5 bedroom house
| Category | No Depreciation | Claiming Depreciation |
| Annual Income | $200,000.00 | $200,000.00 |
| Expenses | ||
| Interest on investment loan | $87,924.00 | $87,924.00 |
| Rates, management fees, repairs and maintenance | $15,125.00 | $15,125.00 |
| Total Expenses Paid Out | $103,049.00 | $103,049.00 |
| Taxation Loss (income minus expenses) | $96,951.00 | $96,951.00 |
| Add Tax Depreciation Loss | $- | $40,329.00 |
| Full Taxation Loss | $96,951.00 | $137,280.00 |
| Tax Refund (based on 45%) | $43,627.95 | $61,776.00 |
| Net cash flow position monthly (taxation loss divided by 12 months) | $3,635.66 | $5,148.00 |
| Improved position per month (approx.) | $1,512.34 | |
| Improved position annually (approx.) | $18,148.05 |
Tax Depreciation of an SDA property vs a standard residential property
It has been established that SDA properties cost more to build, however, tax depreciation benefits can help to outweigh these costs. The below case study illustrates, that a standard 5 bedroom brand new property, would attract $67,450 in deductions in the first five years, however, if this property was a furnished SDA property, the deductions would be a whopping $188,863.
| Property Type | Year 1 Deductions | First 5 years | Total Build Cost |
| Standard Brand New 5 Bedroom Project House | $17,240 | $67,450 | $365,000 |
| Standard SDA Brand New 5 Bedroom House | $40,329 | $166,745 | $783,696 |
| Standard SDA Brand New 5 Bedroom House (Furnished) | $45,063 | $188,863 | $808,944 |
Why choose Capital Claims to prepare your SDA depreciation schedule?
The Australian government supports SDA housing through various incentives, including tax depreciation benefits and grants. These incentives are designed to encourage property investors to participate in the SDA market and this is where Capital Claims come in.
Capital Claims are specialists in preparing SDA tax depreciation schedules and are a Registered Tax Agent with the Tax Practitioners Board and a member of the Australian Institute of Quantity Surveyors (AIQS).
Our extensive experience and industry knowledge in methodology, legislation, and case law, coupled with the sophistication of our estimating tools, mean our clients can feel assured that every single claim will be maximised.
To find out what you can claim, call our friendly depreciation experts on 1300 922 220. We are more than happy to provide a free estimate of what is available to you in tax depreciation deductions, or feel free to enquire online.
Click here to 'Get a free quote and estimate of deductions', simply fill in the details and we will happily get back to you as soon as possible.
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