Only 20% of Property Investors are claiming their full entitlement to depreciation in their tax returns.
Are you missing out on thousands of dollars in tax deductions this year?
Property investors are in the business of making money, and as with every business, the Australian Taxation Office allows you to claim depreciation as a tax deduction.
Depreciation is the accounting method used for calculating the loss in value of a building and it fixtures & fittings as the property gets older. With a Tax Depreciation Schedule, you can claim that loss on rental properties as a deduction in your tax return every year until the cost of the asset is fully written off.
This is how it works now…
Anyone who buys an established property after the 9th of May 2017 for investment purposes will no longer be able to claim depreciation on the Plant & Equipment (fixtures & fittings) for that property. This legislation is designed to prevent 'double-dipping' by all successive owners of the property claiming depreciation on the same pieces of Plant & Equipment.
Existing owners who have leased their property before the 1st of July 2017, brand new properties, commercial premises and Plant & Equipment purchased by the investor are exempt.
For new investors entering the market buying established properties, there are still significant deductions available on the construction cost (Capital Works) of the property to claim. However, changes will not affect people who already own rental properties before the 1st of July 2017. So now is a good time to ensure all eligible property owners have a Tax Depreciation Schedule in place to take advantage of all the tax deductions they are entitled to.
By estimating the value of each item, an investor who purchased a property before the 9th of May 2017 (or who buys/builds a brand new property) can claim $2,816 in this kitchen in the first full year alone. But depreciation is not limited to the kitchen, it applies to every room of the house plus the outside areas. For strata properties, your portion of the common area can also be claimed, including;
No matter when you purchased the property, a Tax Depreciation Schedule could save you thousands of dollars each year in tax. Your accountant may even be able to amend your previous two tax returns if you have not claimed it in the past.
A 70m² unit in a residential tower, built 2006, 9km from Perth CBD.
Our client purchased this property in 2013 and furnished it as a rental investment property.
Where we helped
Uncertain about the advice he was being given from Tax Depreciation companies on the East Coast of Australia, he rang Asset Reports and booked a physical inspection by one of our dedicated property inspectors.
The apartment and furniture package were obvious deductions to our client, although he was pleasantly surprised by the higher depreciation rates on the laundry appliances, kitchen appliances, and cutlery and crockery.
The Real Kicker
What our client didn’t realise was the significant deductions he was entitled to for the common area facilities and equipment in the entire building.
By conducting a physical inspection, we were able to identify our client’s entitlement to claim Depreciation on:
The reception / foyer
Electric door locking systems
Automatic garage doors
Driveways & footpaths
Elevators and stairwells
Fire detection and suppression system