How can depreciations fund your improvements?
Something that is often overlooked when a landlord spends money updating their property is the extra depreciation deductions the Australian Taxation Office (ATO) allows investors to claim.
Depreciation is a non-cash deduction available for property investors to claim for any wear and tear that occurs to the building structure or the plant and equipment items contained within the property.
If an item is removed, any remaining un-deducted value can be claimed for this item.
To claim depreciation, investors are recommended to speak with a specialist Quantity Surveyor to obtain a tax depreciation schedule for their property. Quantity Surveyors are recognised by the ATO under Tax Ruling 97/25 as one of a few professions with the expert knowledge required to calculate costs for depreciation purposes.
When replacing existing assets or structures in a property, an owner should contact a specialist Quantity Surveyor prior to removal of any items. The Quantity Surveyor will take photographs and note every plant and equipment asset contained within the property. The depreciation deductions for these items will be listed individually within the depreciation schedule based on their individual effective life as well as any depreciation deductions available for the building structure.
After the renovation has been completed, a Quantity Surveyor will visit the property again to note new inclusions and arrange an updated depreciation schedule to maximise the depreciation deductions which can be claimed for the remaining life of the property.
Investors should obtain a depreciation schedule immediately on settlement of their property, however if an investor has not been claiming deductions, the ATO will allow investors to go back and amend the two previous financial years claims. In special circumstances (such as if the owner has been living overseas or if the property is owned by a trust or a company) the ATO may allow longer.
It is always worth enquiring, no matter what age the property is or how long it has been owned. Depreciation has the potential to add $5,000 to $10,000 in deductions in the first financial year, money investors definitely don’t want to miss out on.
Owners who would like more information about the depreciation deductions available in their investment property can speak with one of the expert staff at BMT Tax Depreciation for advice on 1300 728 726.
Article provided by BMT Tax Depreciation.