Tax Depreciation |
Maximising Tax Credits from Investment Property
Many property owners are losing potential
credits by failing to take full advantage
of a property’s
tax depreciation potential. An often overlooked
method of obtaining tax credits, property
tax depreciation is available to any property
owner who obtains assessable income by way
of rent or operates a business from a property.
Answers to some of the key questions asked regarding
depreciation of investment property are:
- As a general rule any property constructed
after 17 July 1985 (residential)
and 20 July 1982 (non-residential) is eligible
for the construction write-off allowance;
- All buildings,
regardless of age, will attract
depreciation and the building write-off
allowance if refurbishment works have been
undertaken since 17 July 1985 (residential)
and 20 July 1982 (non-residential);
- All external works including fencing,
paving, pergolas, garden sheds etc
constructed after February 1992 will attract
the building write-off allowance;
- A depreciation report can be prepared
to allow a client to easily recover
missed depreciation benefits (up to
a period of four years) by amending previous
tax returns.
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BMT & ASSOC
are specialists in the field of property
tax depreciation. When BMT & ASSOC
are engaged, the client is assured of obtaining
the maximum possible deduction from the property
while still being ATO compliant.
Over a number of years BMT & ASSOC
have developed an integrated property assessment
system that ensures the maximum number of depreciable
items are identified. This increases the client’s
tax deduction in the first five years of ownership.
This in-house program allows BMT & ASSOC
to deliver significant time and cost savings
in the preparation of a depreciation schedule,
therefore decreasing the cost to the client.
BMT & ASSOC constantly liaise with the
Australian Tax Office and therefore identify
the maximum amount of depreciable items, generating
a greater deduction, and reducing the client’s
taxable income.
BMT & ASSOC provide an Australia wide
service dedicated to maximising property tax
depreciation deductions from individual property
investments to large property portfolios.
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Maximising Your Property’s Tax Depreciation Potential
All types of income producing properties have
substantial taxation
benefits, over and above negative gearing, that
the owner is
entitled to claim as a tax credit. Any property,
which is either
rented or used for income producing purposes, is
eligible to be
depreciated.
In order to maximise the tax benefit a particular
property will
attract, the owner will require the services of
a recognised
property tax depreciation expert with specific
construction costing
skills and experience.
Tax legislation recognises only certain professionals
within the
construction industry as having the relevant qualifications
to
estimate the cost of building components for tax
depreciation
purposes. BMT & ASSOC, as property depreciation and construction
cost consultants, are recognised by the Australian
Taxation Office
as having the expert qualifications and experience
to produce
estimates of construction costs.
The process of maximising a depreciation claim
is based on
an intimate understanding of the Income Tax Assessment
Act, applicable Income Tax Rulings, Case Law and
specific
construction costing skills. Each property scenario
is different
and must be analysed by a specialist to optimise
the depreciation
benefits.
Particular buildings that will attract a claim
include: investment
apartments, houses, townhouses and duplexes, warehouses,
commercial office buildings, office towers, shopping
centres,
childcare centres, hotels, nursing homes, hospitals,
retail
centres, industrial complexes and government properties
for sale.
Basically any building that is used for income
producing purposes
has potential for tax depreciation.
| Building Type |
Purchase Price |
Year 1
Depreciation |
Year 1-5
Cumulative
Depreciation |
| 1 BR Unit |
$300,000 |
$8,000 |
$38,000 |
| 2 BR Unit |
$400,000 |
$10,000 |
$45,000 |
| 3 BR Unit |
$450,000 |
$12,000 |
$55,000 |
| Townhouse |
$300,000 |
$6,000 |
$25,000 |
| Townhouse |
$400,000 |
$7,000 |
$30,000 |
| Residential |
$250,000 |
$5,500 |
$24,000 |
| Residential |
$375,000 |
$6,500 |
$28,000 |
| Commercial |
$2.5m |
$100,000 |
$450,000 |
| Industrial |
$1m |
$35,000 |
$165,000 |
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