Tax time is fast approaching – are you prepared?
Tax Depreciation is a crucial part of any investment property strategy, but only 20% of property investors are taking advantage of it.
Depreciation is the accounting method used for calculating the loss in value of a building over time. It involves calculating how much your investment property depreciates each year, and producing a Schedule so you know how much you can claim in deductions each year.
Below are four common myths about Tax Depreciation:
1. My accountant will arrange this for me.
Some accountants may organise for a Tax Depreciation Schedule to be completed for you, however it may end up costing you more time and money, as the accountant will need to contact a Quantity Surveying company anyway to complete this for you. It is always best to arrange for a Tax Depreciation Schedule to be completed as soon as possible so it doesn’t delay submitting your tax return – there is no need for your accountant to be the middle man.
2. I have had my investment property for many years without a Schedule in place so there’s no point ordering one now.
Not at all! You can still claim depreciation for two previous financial years. This is known as ‘recouping missing deductions’.
3. It’s just more money to spend every year.
You only pay for your Tax Depreciation Schedule once - you can then use your completed Schedule to claim deductions for up to forty years after the date the property was built. The initial fee is affordable and completely tax deductible.
4. I only own a small apartment so there won’t be much to depreciate.
If you own an apartment you are able to claim depreciation on a portion of the Common Areas to increase your returns.