December 05, 2016
When you are a property investor, there are certain tax benefits you are entitled to.
Some property investors don’t know what these benefits are and thus fail to take full advantage of them when lodging their tax return.
One of the biggest claims you can make as an investor is property depreciation.
In the same way you can claim wear and tear on a vehicle that has been purchased for income producing purposes, you can also claim the depreciation of your investment property against your taxable income.
There are two different types of depreciation allowance: building allowance and plant and equipment allowance.
Building allowance refers to the construction costs associated with your property – brickwork, concrete etc. Meanwhile, plant and equipment allowance refers to items within your property that can suffer wear and tear, like blinds, ovens etc.
How can you claim depreciation?
In order to claim property depreciation, property investors are usually required to engage with a Quantity Surveyor to complete a Tax Depreciation Schedule.
The schedule outlines the deductions that are available to them on their property and is used by an investor’s accountant when they are preparing their tax return.
If you are a property investor and you haven’t previously claimed property depreciation, the good news is you are able to go back and amend previous returns in order to claim missed deductions.
We can talk you through how property depreciation works in more detail and put you in touch with the appropriate people so that your investment property works harder for you and your bottom line.
Key points to remember
At the end of the day, property depreciation is a great way to increase cash-flow on a residential property. If you are looking to make property depreciation work for you and your needs, there are some key points to remember, including:
Property depreciation doesn’t just apply to new properties: An investment property does not have to be new. Both new and old properties will attract some depreciation deductions.
Deductions are available for 40 years: According to the ATO, buildings are able to claim deductions for 40 years. So, if an investment property is brand new, investors can claim up to 40 years of property depreciation.
Renovations can also be claimed: Anything in the property that occurred in a previous renovation can be estimated by a Quantity Surveyor and deductions calculated accordingly. This includes items that are not obvious, for example new plumbing, water proofing, electrical wiring or a pergola.
Call Suzanne, Owun or Costa on 02 9517 1818, or email firstname.lastname@example.org to discuss your options. Or, if you feel like dropping in at our office, we are located at Suite 106, Flourmill Studios, 3 Gladstone Street, Newtown 2042. Be sure to share our blog on Facebook and Twitter and let others join the conversation!