If you own an investment property, or plan on owning one, you need to be aware of the ways in which your investment can be a profitable one. The one thing that property owners often overlook is the depreciation of their building and equipment, which can end up costing them money. Being aware of the tax depreciation schedule and the entitlements available to you are crucial when investing in property, and while it may all seem a little complicated, it can be broken down into two main categories: capital allowances (Division 43) and Plant and equipment items (Division 40).
Capital allowances come into play if you own a property that was built after September 15, 1987. The allowances themselves are based on the historical construction cost of said property, as well as renovations and improvements made by yourself or the previous owner. What exactly does that mean? Let’s say that you invested in a Peregian property that was built in 1996. At that time, the cost of construction was $200,000, of which $30,000 were plant items. At a rate of 2.5% per year, the deduction amount on the remaining $170,000 would come in at $4,250 for each financial year.
Every year, usually somewhere around July, the Australian Taxation Office (ATO) publishes an asset list of plant and equipment assets, sometimes referred to as “loose assets” than can be claimed by you as a property investor. In the case of a residential property, you are looking at things like carpets, blinds, bathroom accessories, air conditioning units, hot water systems, and a whole lot more, with each of these items part of a depreciation schedule. The depreciation rates, which usually run from 20-100% are different for each item.
To try and quote the amount that you might save come tax time is pretty close to impossible without knowing all of the items that need to be claimed, as well as the construction cost of the property in question. Doing it yourself is also not recommended, mostly because you may undervalue certain items, or perhaps simply miss items that could easily be part of the tax depreciation schedule. It is best that you contact a quantity surveyor for help, as you will then have peace of mind that all your bases are covered come tax time.
As an investment property owner, it’s important to have some level of cash flow available to you, as there are going to be times when you need to shell out money for upgrades or repairs. Taking a trip to a tax accountant is not always fun, but it can become a much happier experience if you have a clear list of what can and cannot be claimed. For many property investors, the tax depreciation schedule can be a life saver, and can help them build their investment portfolio, but only if they are getting all the allowances that they are entitled to. It’s important that you talk to a professional Sunshine Coast quantity surveyor so that you are sure you are claiming all that you can.
For Property Depreciation and Tax Allowances on investment properties please complete the information worksheet relevant to your property type. Submit online or print and fax.
Our fees are tax deductible as an expense and a receipt is included with your report.