It’s a new financial year and most landlords will be getting ready to visit their Accountant. As they organise their invoices, investors are aware they are able to claim back the expenses they have incurred for their investment property. Despite this, many do not claim all the deductions that are available to them.
According to BMT Tax Depreciation’s Chief Executive Officer Bradley Beer, an astonishing 80 per cent of investors do not claim depreciation deductions. Owners of older properties in particular tend to be the most likely investors who miss out on depreciation claims.
“Often investors who own older properties think it is not worth claiming or they are ineligible due to the age of their property,” said Bradley.
“Despite these restrictions, there are still substantial deductions available. BMT Tax Depreciation usually finds an average of $4,042 in annual depreciation deductions for the owners of investment properties which were built prior to 1987,” said Bradley.
The additional funds made available from depreciation can make a big difference to an investor’s cash flow.
Even a basic understanding of depreciation can help Property Managers to guide their investor clients towards making an informed decision. Encouraging an owner to obtain a depreciation schedule will help them to maximise their cash flow, and even make owning their next investment property more achievable.
So, let’s look at some of the reasons why all investment property owners should claim depreciation.
- Deductions are available for the building structure and plant and equipment assets
Both new and old properties will attract some depreciation deductions. This is because deductions are not just available for the buildings structure via a capital works deduction. Investment property owners are also entitled to claim substantial depreciation deductions for all plant and equipment assets contained in the property.
Though property owners can only claim capital works deductions for residential buildings in which construction commenced after the 15th of September 1987, depreciation of plant and equipment is not limited by a property’s age. It is also the condition and quality of each item which contributes to the depreciable amount.
In a standard residential property, more than 15 per cent of the total construction cost is made up of plant and equipment assets. This can represent a significant proportion of the total depreciation available and thousands of dollars in deductions for the owner.
The ATO also allow owners to claim a capital works deduction for any recent renovations that have been made to an investment property, even if the renovations were completed by a previous owner.
- Deductions are available for forty years
The ATO has determined that the owner of any building eligible to claim the capital works deduction can do so for forty years. While investors of newer buildings can generally claim deductions for the full forty years, owners of older properties can still claim the remaining balance left of the forty year period from the construction completion date. A specialist Quantity Surveyor will always outline the full deductions available over this period within a tax depreciation schedule for both the owner and their Accountant.
- The cost to organise a depreciation schedule is 100 per cent tax deductible
In order to claim depreciation, investors are encouraged to consult with a Quantity Surveying company who specialise in tax depreciation. They will prepare a tax depreciation schedule for both the owner and their Accountant to use when completing their annual tax assessment. The fee to organise a schedule is 100% tax deductible. If an investor has not claimed depreciation in the past, the last two years tax returns can also be adjusted.
Enlist the assistance of a depreciation expert
Ensuring any property investor’s depreciation claim is maximised requires a combination of construction costing skills and thorough knowledge of current tax depreciation legislation. For this reason, it is recommended to contact a Quantity Surveyor who specialises in tax depreciation for advice and assistance.
With more than seventeen years experience in the preparation of tax depreciation schedules, BMT Tax Depreciation help Property Managers all over Australia to educate their clients about the benefits of property depreciation.
BMT can provide Property Managers with a range of complimentary information and services which will add to their existing service. If you would like to request material, arrange a training session for staff or clients you can do so by visiting the BMT free resources page by clicking here. Alternatively, you can speak to any of the expert staff at BMT by calling 1300 728 726.
Article provided by BMT Tax Depreciation.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation. Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia-wide service.
