To even experienced property investors, depreciation can still be a bit of mystery, to novice property investors it most certainly always is.
To simplify depreciation, you can claim the wear and tear of an investment property as a tax deduction against your income.
There are two components to this claim; Building Allowance (bricks, concrete etc.) & Plant & Equipment (Carpets, Ovens etc.). As Quantity Surveyors we categorise elements of the building into a “Depreciation Schedule” so you can claim the right deductions come tax time.
Well here are 5 things you may not know about property depreciation schedules:
Property Tip 1. Renovated properties – you can buy a property that might be over 100 years old…and provided it’s been renovated after 1987 you can claim the costs of those renovations. So even if you didn’t do the renovation the deductions are there for the taking!
Property Tip 2. Scrapping reports – If you buy a property and are going to renovate the property, it’s worth getting a Quantity Surveyor out like Washington Brown, who will attribute values to those items that are about to be removed. This can add up to a substantial amount, especially if the property was built after September 1987. In order to do this, the property has to be income producing prior to the commencement of the renovation.
Property Tip 3. Old properties depreciate too – In order to claim the Building Allowance the property needs to be built after September 1987. But, you can still claim depreciation on things likes carpets, ovens & blinds – regardless of the age. Most Quantity Surveying firms guarantee to get you at least twice your fee as a tax deduction in the first year or give you the report for free.
Property Tip 4. Backdating reports – If you haven’t claimed depreciation because you didn’t know about it – there is good news. You can go back and amend your previous 2 tax returns and get the missing deductions backdated. It will cost you in accounting fees, but could well be worth it.
Property Tip 5. Quantity Surveyors & the ATO – If you buy a property built after September 1987, Quantity Surveyors are allowed to the estimate the costs of construction. Your accountant, property valuer & real estate agent are not suitably qualified according to the ATO.