Overview
The Australian Taxation Office, (ATO), allow a taxpayer to claim deductions for expenses incurred when earning assessable income. In the case of an investment property there are capital costs associated with producing a passive income stream known as rent and the acquisition of some of these capital assets is depreciable. This is because these assets lose value over time in providing a benefit to the property occupier. The ATO website publishes a list of these assets with an “effective life” which may be written off over a period of time as a tax deduction and this is known as depreciation. Examples of this asset class are sometimes referred to as Plant and equipment. For residential properties examples include; Dishwasher, Oven, Cooktop, Range hood, Heating and Cooling systems along with Blinds, Carpets, Overlay boards and Window furnishings.
Unsure what a tax depreciation schedule is? Don’t worry you are not alone.
Research has shown that 80% of Australian property investor’s, are unaware that they need to provide their accountant with a tax depreciation schedule for each investment property that they own. This means many Australian investors are ignoring thousands of dollars of depreciation deductions they may be entitled to each year.
So how does it work?
When compiling a tax depreciation schedule for an Investment Property there are two different asset classes available to be offset against your income stream, “Rent”. One type as mentioned above are depreciable assets as listed by the ATO website. This asset class is depreciation rulings as Div 43. The second type of asset class refers to the Building Allowances referred to as Div. 40 in Taxation law. The Building Allowance deducts a percentage of the original construction costs against your assessable income but excludes depreciable assets. A Driveway or Brick wall would be an example of a Building Allowance item.
How much can I save?
Investment Properties are usually quite different. It is therefore appropriate for a qualified and registered Taxation Practitioner to perform a site inspection and measurement. We will always perform a Property Inspection to identify all asset classes which can be depreciated or claimed against. We will provide a comprehensive Tax Depreciation Report which will clearly outline all the deductions you are entitled to.
Does new property depreciate more than old property?
Yes. Nevertheless older properties which have recent improvements may also have significant depreciable assets to claim and a Depreciation Report should be prepared.
How long will it take to complete my property depreciation schedule?
Your depreciation schedule will take approximately three to five working days to complete once the site inspection has been organised and completed. PT Property Reports normally organises the property inspection with your managing agent.
How much will my property depreciation schedule cost?
The cost for your schedule varies depending on the type and the location of your investment property. Typically a Depreciation Schedule prepared by us starts from $500.00 plus G.S.T for Melbourne metro areas. We will travel to regional areas in Victoria upon request.
Is my property too old to claim Property Depreciation?
If it was originally built before 1985 then it will probably be too old to prepare a tax Depreciation Schedule unless there have been significant improvements made to the property after this date. Please contact us to discuss. In some cases the internal fit out (i.e. carpet, blinds, ovens etc) of an older property may have some residual value left to prepare a Depreciation Schedule.
My property is renovated. Can I still claim?
Yes. You will need to provide us cost information if you have it on hand. Alternatively we will make estimation from the site inspection and information you provide us with.
