You’ve bought an investment property, so now you can sit back and watch those returns roll in, right?
It’s not quite as easy as that. Up to 80% of property investors don’t take full advantage of tax depreciation. Ignore the details of what you can claim, and you could leave up to $15,000 on the table each financial year. That could slow the growth of your investment portfolio, or cost you an annual family holiday.
The low-down on tax depreciation schedules
The good news is it’s easy to become depreciation-savvy. With quality data and the right paperwork in place, you’ll get more cash back in your pocket each financial year.
Nathan King, National Director Advisory from Acumentis Property Valuers says the best way to maximise your investment is to have a qualified quantity surveyor prepare a detailed Tax Depreciation Schedule.
This is a 40-year forecast prepared by experienced quantity surveyors and property valuers who know property and buildings inside and out. The schedule lists every depreciable item, including the building costs and asset values of your property and their depreciation through wear and tear.
“The Tax Depreciation Schedule covers Capital Works –– the bricks and mortar, foundations, walls, roofs and fixed items like doors and windows. And Plant and Equipment –– the easily removable items, like carpets, blinds, air-conditioning, ceiling fans and kitchen appliances”, King explains.
A depreciation schedule will outline any building works undertaken on a property and their costs.
Tax depreciation misconceptions
Many investors miss vital depreciation opportunities and lose thousands. You might be losing easy cash because of one of these common misconceptions:
- You think your property is too old, any investment property built after 1987 can attract deductions.
- You assume you can’t claim for renovations completed by the previous owner, you can! When you purchased the property, you purchased the entitlement to claim depreciation on these improvements.
- You think your property is too small to make a depreciation schedule worthwhile. Small apartments have many depreciable items including common areas like pools, gyms and entertaining spaces
- You’ve lost ground by not having a schedule in place sooner and think it’s too late to start. The good news is you can claim for back dated depreciation so it’s not too late, start saving today.
- You think your accountant will take care of tax depreciation for your investment property. A tax depreciation schedule must be prepared by a registered quantity surveyor and with an experienced property valuer undertaking the inspection they’ll make sure all the depreciable Items in your property are listed.
A Tax Depreciation Schedule report will be based on your property’s type, age and historical construction allowances.
“When you give this report to your accountant, you can claim all the depreciation allowances you’re entitled to. It’s an ongoing tax deduction over a period of time, and will reduce your payable tax and increase money in your pocket,” King says.
Maximise your property investment returns
Whether it’s tax depreciation schedules, capital gains tax valuations or self-managed super fund property assessments, it’s more important than ever to get professional advice.
“The government has in place various incentives running until 2023 that may mean depreciation deductions can be increased. The intricate details of these deductions may not be known by your accountant,” King warns.
Avoid paying more tax than you need by having the tax deductions for your investment property outlined for your accountant.
“A Tax Depreciation Schedule helps with your cash flow,” he says. “At Acumentis, we provide your accountant the information they need to use recognised best practice acceleration techniques and take advantage of any legislative changes, which means you’ll maximise depreciation deductions sooner. You’ll free up more cash and can build your property portfolio faster.”
One schedule lasts the life of an investment. You need only update a Tax Depreciation Schedule if you make extensive renovations or have additional costs. Allowing experts to do the legwork for you now will pay big dividends over the life of your investment.
Schedules cover all property types, including agricultural, residential and commercial.
And the icing on the cake? The fee for a Tax Depreciation Schedule is 100% tax-deductible itself.
This article was originally published on
16 May 2022 at 11:35am
but has been regularly updated to keep the information current.