Property investors – are you maximising your tax returns?

To maximise the amount you make from your investment property it’s imperative that you get the right tax advice. However, many investors are missing out on thousands of dollars a year simply because they are failing to claim back on property depreciation.

So what is depreciation?

Property depreciation can be confusing for those who are unfamiliar with it. Basically, the Australian Tax Office (ATO) recognises that items such as buildings and furniture depreciate in value as they age, and this loss in value can essentially be claimed back as a tax deduction.

One of the most common misconceptions about property depreciation is that it is only available for new properties. While it’s true that newer properties stand to benefit the most, depreciation claims can be made on older properties too.

There are two types of property depreciation claims:

Capital works deduction – A claim can be made for buildings up to 40 years old, this is based on the expected life of the building itself.

Depreciating assets – Properties of all ages can claim on depreciating assets, which are removable items within a property such as light fittings, carpets and stoves etc.

How can I make a claim? 

The first step to ensuring you’re getting your full benefits is to find a qualified quantity surveyor. They will inspect your property and prepare a depreciation schedule for your accountant to use.

A quantity surveyor’s fees are tax deductible and a depreciation schedule is normally good for a number of years.

Property depreciation changes from the 2017 budget 

It should be noted that there have been recent changes to property depreciation rules that have come out of the latest budget. 

Under the new rules, plant and equipment deductions on items that can be easily removed, such as carpets and dishwashers, will only allowed by investors who personally incurred the expense. Previously, subsequent owners were able to claim on these items.

However the rules will be “grandfathered”. Meaning that anyone who has purchased a property before the 9th of May 2017 will be able to claim depreciation as per normal.

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