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Missed claiming depreciation last financial year? It’s still not too late!

BMT team — Fri, 12 Jul 2024 23:52:02 +0000

You don’t need to daydream about a lottery win to get thousands in your pocket. If you’re a property investor, a natural process called depreciation means you can claim thousands, sometimes tens of thousands, without spending any money. BMT research suggests that approximately 80 per cent of investors fail to take full advantage of property depreciation. In some instances, it’s because they aren’t aware of when they are eligible to claim. BMT has answered your questions about when you can claim depreciation, and what to do when your tax depreciation schedule isn’t prepared before June 30. Contents What is property depreciation and how do you claim it? Order a schedule after June 30 and still claim for the last financial year Your tax depreciation schedule starts from your settlement date Genuinely available for rent Partial year deductions Key points: A tax depreciation schedule can be completed after June 30 Depreciation deductions start from your settlement date, not when the report was completed Depreciation can be claimed if the property is genuinely available for rent Partial year deductions are available for all investment properties What is property depreciation and how do you claim it? Depreciation is the natural wear and tear of a building’s structure and assets. If you’re an investor, you can claim this depreciation as a tax deduction. Depreciation is called a non-cash deduction because you don’t need to spend any additional money in order to claim it. A tax depreciation schedule is an essential piece of the depreciation puzzle. The first step of this process is a site inspection completed by a specialist site inspector from a quantity surveying firm. From here, the firm prepares a tax depreciation schedule that includes all depreciation deductions available. An accountant uses this schedule to determine your deductions at tax time. The tax depreciation schedule lasts the life time of the property and can be revised if any changes are made, such as a renovation. Order a schedule after June 30 and still claim for the last financial year You can still claim depreciation for the last financial year if your property’s tax depreciation schedule is completed after June 30. For example, if you ordered a tax depreciation schedule in July 2024 you can still claim depreciation deductions for the 2023/24 financial year. The only difference ordering a schedule before June 30 makes is how quickly you can claim back the schedule fee. This 100 per cent tax deductible fee can only be claimed in the year it was paid. Your tax depreciation schedule starts from your settlement date It’s important to know that it’s never too late to claim depreciation. When depreciation is missed in previous years, a tax depreciation schedule lets you claim back missed dollars. This is because the schedule starts from your settlement date, not the date the schedule was prepared. If you own a second-hand property and can’t claim depreciation on previously used assets, it’s important to let the quantity surveyor know of any new additions you have added to the property. This will allow you to claim depreciation deductions on them as they aren’t affected by the 2017 legislation changes. Genuinely available for rent Your investment property doesn’t need to be leased to allow you to claim depreciation deductions. As long as the property is ‘genuinely available for rent’, depreciation can be claimed. This means if there’s a gap where you are searching for new tenants, depreciation deductions are still available. Partial year deductions You can still claim depreciation deductions if you settled the property during the financial year, or if it’s only available for rent for part of the year. A tax depreciation schedule considers what is called ‘partial year deductions’. This means even if there is only a few days, weeks or months left in the financial year, depreciation deductions are still available. Partial year deductions are calculated on a pro-rata basis using the time the property was used as an investment. There are also mechanisms in depreciation legislation that a specialist quantity surveyor will apply to increase the claim for a partial year, even if the partial year is only a few days. This includes the immediate write off and low value pooling which allows you to claim particular qualifying new assets in full or at an accelerated depreciation rate regardless of how long they were owned. BMT specialises in preparing comprehensive tax depreciations schedules. We ensure that nothing is missed and that the highest level of compliance is maintained. To learn more about depreciation and the services offered by BMT, Request a Quote or contact the team on 1300 728 726.

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Six depreciation questions to ask yourself this tax time

BMT team — Tue, 28 May 2024 05:53:56 +0000

With tax time fast approaching, here are six questions you should be asking yourself to ensure you’re getting the most out of your investment property. 1. What are some common deductions I’m entitled to as a property investor? As a property investor, you’re entitled to a range of tax deductions. These will help lower your taxable income and make owning an investment property more viable, particularly if you own a negative cash flow property. Some of the tax deductions available to investors include deductions on council rates, the interest from a mortgage, property management fees, land taxes, strata fees, maintenance costs, insurance, accounting fees and depreciation. Of these deductions, depreciation is the most often missed. This is because it is a non-cash deduction. That is, the owner does not need to spend any money to claim it. In fact, research has shown that 80 per cent of property investors are missing out on the depreciation deductions they’re entitled to. However, given that investors can claim an average of $9,000 – $15,000 in deductions in the first full financial year alone, this is a deduction that should not be overlooked. A BMT Tax Depreciation Schedule outlines all the deductions you can claim for your property. It lasts for forty years and the fee for preparing it is 100 per cent tax deductible. 2. I’ve bought an investment property in the last few months – can I make a claim this tax time? If you haven’t owned the property for long and it’s only been income producing for a few months in the last financial year, you will be able to make a partial year claim. The Australian Taxation Office (ATO) allows investors to make a claim for depreciation based on the amount of days a property was available for lease. This could be if you’ve only recently purchased an investment property and only have one month to claim for, or you use your home as a holiday rental for part of the year. A BMT Tax Depreciation Schedule makes a partial year claim like this easy for you and your Accountant. 3. Do I need to update my tax depreciation schedule? If you’ve made any updates to your property in the past financial year, such as a renovation, it’s a good idea to get in touch with your Quantity Surveyor to see if you will require an updated depreciation schedule. It’s important to be aware that there is a difference between a repair and a capital works improvement as this will affect your claim. The cost of any repairs can be claimed in full in the same financial year they are completed. An improvement, on the other hand, is when you improve the condition of an item or property beyond that of when it was purchased. Such improvements are capital in nature and must be depreciated over time. For this reason, if you’ve made any renovations or improvements to your property in the last financial year, you should seek the advice of a property depreciation specialist or Quantity Surveyor to ensure it is claimed correctly. An updated tax depreciation schedule may be required after a renovation to capture all newly installed plant and equipment assets or capital works expenditure. 4. Am I maximising the deductions for my property? It’s one thing to be claiming deductions, but are you maximising them? A Quantity Surveyor specialising in depreciation will be aware of all the techniques you can make use of to maximise and accelerate the deductions you’re entitled to. As well as identifying assets that others may miss, they will make use of tools such as low-value pooling, scrapping and split reports to maximise the deductions you’re legally entitled to and put more money back in your pocket sooner. 5. Can my Accountant organise my depreciation deductions? An Accountant should recommend that you claim depreciation, organise a schedule on your behalf or refer you to a Quantity Surveyor. They will however not be able to estimate construction costs or provide you with a tax depreciation schedule. Only a qualified Quantity Surveyor can do that. Quantity Surveyors are one of the few professionals recognised by the ATO to have the appropriate construction costing skills to estimate building costs for depreciation. However, not all Quantity Surveyors specialise in tax depreciation. Only a tax depreciation specialist such as BMT can be relied on to maintain detailed knowledge of all current ATO tax rulings relating to depreciation. Once you have a Tax Depreciation Schedule completed, your Accountant can input these deductions into your annual income tax return. 6. I’ve only just found out about depreciation. Does this mean I’ve missed out on past years’ deductions? Investment property owners often enquire about a property they have owned and rented for a number of years but have not claimed depreciation deductions for. The ATO allows tax returns to be easily adjusted for two years after the initial submission. This enables property owners to recoup some of the deductions that may have been missed. It is important to note that a separate application will need to be submitted for each financial year requiring an amendment. Income, depreciation and other claims made will impact the outcome of each tax return. In the situation where an investor has missed or not maximised their claim in previous years, the depreciation schedule can be tailored within the eligible years. To start claiming or maximising your depreciation deductions with BMT, request a quote.

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Start claiming depreciation deductions sooner

BMT team — Thu, 04 Apr 2024 00:13:07 +0000

With the end of financial year fast approaching, now is the time to get your tax depreciation schedule sorted if you haven’t already. There are significant advantages to ordering a depreciation schedule immediately after purchase that can help you to maximise your return and make the most of your investment. Before we look at those advantages, let’s recap what depreciation is and how it assists property investors. Contents: Depreciation deductions Claim the cost of your schedule straight away Partial year claims Receive payments regularly using Pay as You Go (PAYG) Claim missed deductions Depreciation deductions The Australian Taxation Office (ATO) allows property owners to claim the depreciation, or decline in value of an asset, as a tax deduction. Depreciation is a non-cash deduction, meaning an investor doesn’t need to spend any money to claim it. For this reason, depreciation deductions are often overlooked. This is a costly mistake for investors, as depreciation deductions carry significant taxation benefits. With tax time approaching, property owners should be sure they are claiming all the deductions to which they are entitled. Owners of income-producing properties can claim depreciation deductions related to the building’s structure as well as the plant and equipment assets within the property. It’s important to organise a depreciation schedule before the end of the financial year to maximise your deductions and claim everything you’re eligible for from the year. Failing to claim depreciation means missing out on thousands of dollars. In FY2022/2023 to-date, BMT found investors an average first year deduction of almost $9,000. Claim the cost of your schedule straight away A depreciation schedule has a one-off cost which lasts the life of the property (forty years) and will ensure the owner claims their depreciation entitlements correctly. The cost of the depreciation schedule is 100 per cent tax deductible. One of the advantages to ordering and paying for a depreciation schedule before 30 June is that an investor will be able to claim the fee straight back that financial year. This not only means less time out of pocket, but it eliminates the risk of forgetting to claim the depreciation schedule’s fee as a tax deduction in the following financial year. Partial year claims If a property has been owned and rented for only a short period, investors often postpone obtaining a tax depreciation schedule until the next year. However, there are ways in which partial year deductions can be maximised, resulting in extra cash for the owner. Usually, the total depreciation available in the first financial year is adjusted according to the portion of the year the property is owned. For example, if a property is owned for six months, then 50 per cent of the depreciation could become available. However, specialist quantity surveyors can use legislative tools to make partial year claims beneficial to property owners, regardless of the time a property is owned and rented. Immediate write-off is one tool used. Any item added to a property costing less than $300 can be immediately written off within the first year. This is regardless of how many days the property is owned in that year. Low-value pooling can also be used to maximise claims over a short period of time. Low-value pooling applies to items in an investment property that are worth less than $1,000. Placing items in a low-value pool allows the owner to accelerate the rate of depreciation, increasing deductions earlier. A high-quality tax depreciation schedule should include a partial year claim based on the time the property is rented. Receive payments regularly using Pay as You Go (PAYG) Investors often look forward to tax time. Many of the losses from holding a property can be claimed back, including interest, rates, repairs and maintenance, property management fees and depreciation deductions. Many investors may not realise that they don’t have to wait all year to benefit from the deductions available to them. Instead, they can improve their cash flow throughout the year simply by nominating to use a Pay as You Go (PAYG) withholding variation. Introduced in July 2000, a PAYG withholding variation allows individuals to vary the amount of tax withheld by their employer in each pay to anticipate their tax liabilities. This means that they can take advantage of the deductions available to them regularly, rather than waiting until the end of a financial year for their tax refund. By selecting a PAYG withholding variation, a property investor’s expected tax refund for the financial year is estimated. This allows their employer to take less tax out of their wages. As can be seen in the example, a PAYG withholding variation will provide added flexibility for a property investor. Having access to the extra money during the year makes it easier to manage cash flow, especially when there can be surprise costs such as urgent repairs or maintenance. The additional income also gives the owner the option to invest the extra money or reduce loan liabilities. It is important to note that submitting a PAYG withholding variation does not replace a normal tax return. A tax return still needs to be filed at the end of the year to calculate the actual amount of tax liability. Claim missed deductions If you have not previously claimed depreciation deductions on your investment property, the ATO allows you to recoup missed payments for past financial years by adjusting your tax return. This is particularly useful for first time investors who were previously unaware of depreciation deductions. It is always advisable to stay on top of your finances by claiming deductions in the applicable year, as delaying your claim will only add extra confusion and stress to your next tax return. Ordering your tax depreciation schedule before 30 June is important if you want to maximise your returns and keep your finances on track. If you have any questions about claiming depreciation, contact the expert team at BMT Tax Depreciation on 1300 728 726 or Request a Quote.

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Rental property tax deductions you can claim

BMT team — Sun, 31 Mar 2024 22:00:34 +0000

Property investors have access to numerous tax deductions for rental properties, which can reduce taxable income and increase cash flow. Leveraging these deductions supports the development of a successful property portfolio and enhances prospects for future investment expansion. We have listed some of the most lucrative tax deductions all investors should be claiming: Interest repayments Insurance Advertising fees Repairs and maintenance Travel Body corporate fees Property management fees Cleaning expenses Council rates Gardening and lawn mowing Water charges Pest control Utilities Legal fees Tax depreciation schedule and accounting fees Refinancing costs Land tax Property depreciation Interest repayments You can claim the interest charged on your rental property’s home loan. This is in addition to any other fees related to servicing the loan. It’s important to note that you can’t claim payments made on the home loan’s principal amount. The same applies if you have used part of the loan for private purposes. In this instance, any interest repayments deductions must be apportioned. Insurance Protecting your investment property against underinsurance is an important step. The two most common insurances you need for a rental property includes landlord insurance and building and contents. Your insurance premiums are tax deductible. When you pre-pay for your insurances you can claim it back in the same financial year. Advertising fees Finding the right tenants for your property usually requires advertising and marketing. When you organise this yourself, you can claim any expenses from doing so. However, if the rental is managed through a property management agency, you can’t claim any advertising they conducted separately. This is usually included in their property management fees. Repairs and maintenance The repairs and maintenance you complete on your rental property can be significant tax deductions. Repairs are work completed to fix damage or deterioration of a property, such as replacing part of a rusted gutter or broken fence. Meanwhile, maintenance is the work completed to prevent damage to the property such as varnishing a deck. It’s important to be aware of the difference between repairs, maintenance and capital improvements. A capital improvement is when the condition or value of an item is improved beyond its original state. A common example of a capital improvement is retiling a bathroom, which would need to be depreciated as a capital works deduction. Travel Legislation changes made in 2017 may affect your eligibility to claim travel expenses to and from your rental property. Generally, you can only claim travel expenses if you are in the business of renting residential properties. Therefore, the ATO only allows the following entities to claim travel expenses: corporate tax entity superannuation plan that is not a self-managed superannuation fund public unit trust managed investment trust unit trust or a partnership, where all members are entities of a type listed above Body corporate fees If your rental property is part of a strata, you can claim the cost of the body corporate fees. If part of this fee includes maintenance and cleaning to common areas such as the gym or garden, you can’t claim these costs separately. Property management fees It’s common to have a rental property managed through a property management professional. Under this arrangement, you will have a dedicated property manager that looks after things like inspections, organising leases, advertising and handling disputes. The fees associated with having a property manager are entirely tax deductible. You can even claim your own expenses associated with calling or emailing them. Cleaning expenses Sometimes you may need to get your rental property cleaned regularly as part of the lease agreement, or once a tenant has left. You can claim these cleaning expenses as tax deductions. The same applies if you have purchased cleaning products specifically to clean the rental property yourself. The cleaning product costs are also tax deductible, however you can’t claim for your own time spent cleaning. Council rates Local government and council rates are 100 per cent tax deductible for the entire time your property is available for rent. The Australian Taxation Office (ATO) considers these as ongoing expenses that are incurred in the course of earning rental income. The same applies if your local council charges an annual emergency services levy. Gardening and lawn mowing If your property’s lease agreement has garden and lawn maintenance included, you can claim any expenses associated with doing so as a tax deduction. This includes hiring professional lawn mowing and garden maintenance services. Water charges Any water charges you pay for the property are tax deductible. While water usage is sometimes covered by the tenant, the expenses you directly incur, such as the annual service charge and any sewer service charges, can still be claimed. Pest control Household pests can include anything from fleas and cockroaches to ants and mice. Determining who is responsible for pest control can usually be found in a lease agreement. When you are responsible for pest control of the property, the expenses can be claimed as tax deductions. Utilities Including utilities under a lease agreement can increase tenant demand and the property’s rental rate. Any utilities you include and pay for, including electricity and internet, are tax deductible. Legal fees Only some legal fees can be tax deductions. Generally, only legal fees associated with rental activities are tax deductible. For example, if you went to court over malicious damage the tenant made to the property, you could claim the costs of doing so. When legal fees are classed as capital cost, they aren’t immediately tax deductible. The easiest way to remember what a capital costs is, is to think of them as the costs associated with acquiring the property such as stamp duty. Any legal expenses associated with buying the property aren’t tax deductible and instead make up part of the property’s cost base. Tax depreciation schedule and accounting fees Paperwork and tracking income and expenses can be extensive when owning an investment property. Having an accountant to look after this for you is the easiest way to make it a stress-free experience. Your accountant uses a tax depreciation […]

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Should you furnish your rental property?

BMT team — Thu, 07 Mar 2024 22:12:14 +0000

Have you considered leasing out your investment property furnished? When you furnish a rental property, the furnishings become part of the Division 40 plant and equipment assets allowing you to claim depreciation deductions for the wear and tear of the furniture over their effective lives, reducing your taxable income. To help you weigh up the pros and cons of renting out your property furnished, BMT has answered some commonly asked questions when it comes to rental furnishings. Q: Is furniture tax deductible for rental property? A: In most cases, furniture purchased by an investor for an income-producing property will attract depreciation deductions. Depreciation refers to the natural wear and tear a property and its assets experience over time. The Australian Taxation Office allows investors to claim a deduction for this wear and tear. Furniture within an income-producing property is typically claimed as a plant and equipment deduction, which refers to the easily removable items within an investment property. To be eligible to claim depreciation for furniture within a rental property, you must: purchase the items when the property is income-producing or genuinely available for rent directly incur the cost of the furniture. Q: What’s the easiest way to claim deductions for furniture? A: A tax depreciation schedule is the best way to ensure you claim all the deductions you’re entitled to. A BMT Tax Depreciation Schedule covers all deductions available over the lifetime of a property (forty years) and is 100 per cent tax deductible. During the FY 2022-2023, BMT found residential property investors an average first year deduction of almost $9,000. Q: Can I claim deductions on second-hand furniture? A: The short answer is no. While second-hand furniture can be a cost-effective option, it’s ineligible for depreciation deductions. This is due to 2017 legislation changes that disallow depreciation deductions to be claimed on second-hand plant and equipment assets. This includes those that still have remaining depreciable value. Q: Can I charge higher rent if the property is furnished? A: A landlord can typically charge a higher rental rate for a furnished property. Depending on your location and property type, you may be able to charge between 15 to 70 per cent more. While this seems like a fantastic return on an investment, any landlord considering furnishing a rental property should first consider the reduced tenant demand. Most tenants are looking for unfurnished property, so be sure to assess your local property market carefully. Q: What type of tenants will a furnished property attract? A: Furnished properties typically attract travellers, young tenants who haven’t accrued their own furniture and business professionals who frequently move for work. With this in mind, furnished leases reflect the intermittent nature of such tenants and are usually between three and six months long. These types of leases are usually suited to major metropolitan areas or smaller regional centres that have a fly-in fly-out lifestyle. Q: What happens if my furniture is damaged? A: If the lease states that you are renting out a furnished house with appliances, then you’re not only responsible for keeping the building in good shape, but the furniture and appliances as well. However, if the tenant damages your belongings, you may be entitled to make an insurance claim so it’s important to have proper cover. Landlord insurance is a type of insurance policy designed to protect property investors from tenant-related risks including loss of rental income and malicious or accidental damage caused by the tenant. As landlord insurance is an investment expense, it can also be claimed in your annual tax return. It’s important to note that each landlord insurance policy will differ. For more information, contact BMT Insurance on 1300 268 467. Q: When is it a good idea to have an unfurnished property? A: An unfurnished property is more likely to appeal to tenants looking for a home over the long-term. Typically, this means that leases will be for six to twelve months. Some tenants prefer the opportunity to furnish the property and can be put off by a landlord’s furniture. This is especially the case if a tenant already has their own furniture that would need to be stored elsewhere. If you’re undecided on what to do, perhaps advertise your rental as unfurnished and include the option to have it furnished for additional rent in the listing description. There are a number of advantages and disadvantages to furnishing an investment property. It’s important for investors to consider their personal circumstances before making a decision.

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Tax return dates Australian property investors must know

BMT team — Thu, 18 Jan 2024 00:42:41 +0000

Missing a tax deadline is not only stressful but can set a tax return back and potentially result in fines or legal penalties. Never miss an important tax date again by adding the following dates to your 2024 calendar. 2024 key tax dates Tax return lodgement dates vary between individuals, companies, trusts and partnerships. The key factors that determine an individual or entity’s relevant return date is the amount of their tax liability, entity size and if they lodge their tax return themselves or do so through an accountant. January 30 February 28 March 31 May 15 June 5 June 30 October 31 December 1 How to keep track of income and expenses throughout the year January 30 Large and medium trusts with a total annual income of more than $10 million in the latest year lodged and where the trust was taxable in the previous year of lodgement must lodge their tax returns on this date. February 28 Large and medium trusts with a total annual income of more than $10 million in the latest year lodged, where the trust was non-taxable in the latest year lodged, must lodge their tax returns on this date. This lodgement date includes newly registered large and medium trusts. Subsidiary members of a consolidated group that exited the consolidated group in the financial year, and new registrants of head companies of consolidated groups must lodge their tax return by this date. March 31 Individuals, partnerships and trusts with a tax liability of $20,000 or more must lodge their tax returns on this date. This does not include medium or large trusts. May 15 If an investor lodges their tax return via an accountant, the previous financial year’s return must be lodged by this date. Tax returns for all remaining individuals and trusts are also due on this date. Non-profit organisations with a requirement to lodge and which haven’t been allocated an earlier lodgement date must also lodge their tax returns by this date. This includes new registrations and entities not eligible for the 5 June concession. New registrants, excluding large and medium taxpayers, head companies of consolidated groups and SMSFs must also lodge their tax return by this date. June 5 Although 5 June is not an official lodgement date, the ATO allows lodgement of tax returns past the lodgement due date of 15 May for individuals, partnerships and trusts who meet the necessary criteria. You do not need to apply for a deferral to receive the 5 June concession date. This concession allows the tax returns to be lodged by 5 June without penalty, provided any payment required is also made by this date. June 30 The end of the financial year is a key tax date that should be marked in everyone’s calendar. Taxable income and expenses are measured in each financial year and 30 June signals the end of the formal financial year. Investors are encouraged to pay all the expenses they can, before the end of the financial year to ensure the best return. Where possible, expenses such as interest, insurance, tax depreciation schedules and other ongoing expenses should be pre-paid before this date, to ensure that they can also be claimed in the same financial year of payment. October 31 If an investor is lodging their tax return through the ATO’s online MyTax portal, they must lodge the tax return of the previous financial year by October 31. The same date generally applies to all self-lodged returns including partnerships, self-managed super funds, trusts and sole traders, unless lodged through a registered accountant or otherwise advised. Entities with one or more prior year tax returns outstanding as of 30 June 2024 and other entities who have been advised to lodge early must lodge their tax return by this date. December 1 Companies that are not full self-assessment taxpayers must lodge their tax returns by this date. How to keep track of income and expenses throughout the year Be prepared and ensure a stress-free tax time by keeping diligent record of all income and expenses throughout the financial year. Keeping track of income and expenses with an investment property is easy with a MyBMT account. The various tools and features available on a MyBMT account, helps thousands of investors record and track investment property related income and expenses, simplifying the process of sharing expenses with their accountant. Accountants and Property Managers can access records and manage various properties on a centralised MyBMT account. BMT Tax Depreciation is ATO compliant and works closely with accountants to ensure maximum property depreciation deductions for each client. To maximise the property depreciation tax deductions on your investment property Request a Quote or contact the BMT Team on 1300 728 726.

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Property Market Update 2024

BMT team — Mon, 15 Jan 2024 23:34:44 +0000

2023 was a year filled with more than its fair share of challenges, but Australians are tough and the property market was resilient in the face of multiple interest rate hikes and hesitant investor sentiment. Residential home prices across Australia grew by 7% over the year to November 2023, with dwelling prices in the combined capital cities peaking in May, slowing again towards the end of 2023 and settling at 8.2% growth over the year. In contrast residential property values in regional areas showed slower growth, at a rate of 3.4% over the past year. Interest Rates As expected, interest rates continued to rise and many fixed-term mortgage rate loans came to an end, putting some Australians under mortgage stress. Despite these pressures, residential house prices continued to grow, due to the continued imbalance between housing availability and strong demand. This housing imbalance has also impacted the rental market with national rental increases averaging 8.1% over the past year. Despite these increases in rental values, rental yields have shown much smaller growth rates due to interest rate hikes impacting mortgage repayments. Loan Approvals First time loan approvals have increased by 11.8% over the past year, but investor lending was still strong, comprising of more than a third of total approved loans across Australia in 2023. Rising interest rates have done little to slow down the residential property market outlook in most parts of Australia, with monthly sales volumes trending higher than the five-year average despite rising house prices and tighter lending. This upward trend in residential property prices is forecast to continue well into 2024 due to the housing shortage. Investment in alternative property classes will continue to grow in the year ahead. The return of international students is expected to stimulate the demand for student housing and Build-to-rent investment opportunities. Recovery in tourism will also boost consumer demand and growth in the hotel and short-term accommodation market. In line with this predicted growth, we at BMT have seen 15% growth in tax depreciation schedule orders for hotels and motels, affirming the expansion of this sector. Commercial Property Commercial property investors will remain focused on attracting top tenants who are prepared to pay for prime location and amenities, reinforcing the ‘flight to quality’ trend. BMT Tax Depreciation Schedule orders in the industrial sector have grown by 8% while the embattled office sector has shown a 6% decline in the request for tax depreciation schedules in line with market trends. BMT News Overall, it was a challenging but positive year for BMT. We completed more than 40,000 depreciation schedules in 2023, earning our clients hundreds of millions in tax deductions. In 2024 we will have completed close to 1 million depreciation schedules across Australia; an accomplishment that solidifies our position as the number one choice in tax depreciation. In 2023 the Australian Institute of Quantity Surveyors released a white paper validating our approach to property depreciation, insisting that a site inspection by an expert quantity surveyor remains the most reliable way to maximise the depreciation deductions on an investment property. They have also encouraged our industry to move away from referral fees, a practice that BMT has always avoided. Video link We look forward to another great year of partnering with you at BMT. To maximise the tax depreciations on your investment property Request a quote.

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Claiming depreciation on your rental property

BMT team — Mon, 25 Sep 2023 02:05:17 +0000

Imagine buying a lottery ticket that won you almost $9,000. It would be pretty amazing, wouldn’t it? Think of all the things you could do with the additional money – pay off debt, buy that new lounge, renovate the bathroom. What if we told you that on average residential rental property investors can claim this amount in depreciation deductions in the first financial year alone, but around 80 per cent fail to do so. This is because depreciation is a non-cash deduction, meaning that unlike expenses such as interest and property management fees, an investor doesn’t have to spend money to be eligible to claim it. As a result, it’s often missed. If you haven’t been claiming depreciation on your rental property, here are some fast facts to help you better understand what it is and what you can claim. In this article, we will answer the following questions: What is rental property depreciation? What are capital works deductions? What are plant and equipment assets? What are the 2017 legislation changes and why do they matter? What rental properties benefit most from depreciation? Should you get a tax depreciation schedule following a rental property renovation? Can you claim depreciation on a fully renovated rental property? How can you claim depreciation on a rental property? What is rental property depreciation? As a property gets older, the building’s structure and the assets within it wear out – they depreciate. The Australian Taxation Office (ATO) allows owners of residential rental properties to claim this depreciation as a tax deduction. Depreciation can be claimed under two categories – capital works and plant and equipment assets. What are capital works deductions? Capital works deductions relate to claims for the wear and tear that occurs to the structure of the rental property and any fixed items like the roof, walls, doors and kitchen cupboards. Owners of residential property that commenced construction after 15 September 1987 are eligible to claim capital works deductions. These deductions can be claimed at a rate of 2.5 per cent per year for forty years. If your rental property was constructed before this date, you should still enquire about the depreciation deduction available as often these buildings have undergone some form of renovation which can result in capital works deductions. What are plant and equipment assets? Plant and equipment assets refer to the easily removable fixtures and fittings found within a rental property. Common examples include carpet, blinds, air-conditioners, hot water systems and smoke alarms. Depreciation deductions for these assets are calculated based on their individual effective life as set by the ATO. Unlike capital works deductions, depreciation for plant and equipment assets was affected by the 2017 legislation amendments. What are the 2017 legislation changes and why do they matter? Legislation passed in November 2017 brought about major changes to residential plant and equipment depreciation claims. These changes are important because they affect the amount of depreciation you can claim. Under current legislation, owners of second-hand residential properties who exchanged contracts after 7:30pm on 9 May 2017 cannot claim deductions for previously used plant and equipment assets. You can still claim depreciation for any brand-new plant and equipment assets you purchase and install in the property once it is income producing. For example, if you purchase a new hot water system while your property is being leased, you are entitled to claim depreciation for this asset. What rental properties benefit most from depreciation? While almost all residential property investors are able to claim depreciation, given the 2017 legislation those who build or buy brand new rental property will usually claim higher deductions. However, any residential property that has either been built or renovated since 1987 will have a structural claim that will give ongoing deductions for forty years. I want to renovate my rental property. Should I get a depreciation schedule? If you’re considering renovating your rental property, it’s important to have a tax depreciation schedule prepared. There may be substantial depreciation deductions available for structural elements and plant and equipment assets removed during the renovation. A process known as scrapping allows investors to claim any undeducted entitlements for eligible assets in the year the items are removed. It’s important to note that if you live in the rental property while renovating, any newly installed plant and equipment assets will be classed as previously used. This means the assets cannot be claimed. Unless there is good reason, you should only install new plant and equipment assets after you have move out of the rental property and it is available for lease. This will ensure you can claim maximum depreciation deductions. I bought my rental property fully renovated. Can I claim depreciation for the renovation? If a rental property is considered to have been substantially renovated by the previous owner for selling purposes, you can claim depreciation on the new plant and equipment assets along with any qualifying capital works deductions available. It must qualify as a substantial renovation, not just cosmetic. A Quantity Surveyor will estimate anything in the property that is part of a previous renovation and calculate the deductions accordingly. This includes items that may not be so obvious, such as new plumbing, waterproofing and updated electrical wiring. For capital improvements to qualify for the division 43 building write-off, construction must have commenced within specific qualifying dates. Doesn’t my accountant calculate depreciation for my rental property? No. Specialist quantity surveyors such as BMT Tax Depreciation are one of the few select professionals recognised by the ATO under Tax Ruling 97/25 as having the skills to estimate construction costs for depreciation purposes. BMT Tax Depreciation often works alongside your accountant to provide the tax depreciation schedule for your property. How can I claim depreciation on my rental property? The easiest and best way to claim depreciation on your rental property is to get a tax depreciation schedule prepared for the property. BMT Tax Depreciation specialise in maximising depreciation deductions for property investors, […]

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PropCalc: The investment property calculator for all investors

BMT team — Tue, 22 Nov 2022 05:11:31 +0000

The first step towards owning an investment property is making sure you’re in the financial position to do so. The costs associated with purchasing and maintaining an investment property aren’t always clear nor is the potential cash flow outcome. BMT Tax Depreciation’s investment property calculator PropCalc was developed to eliminate the guesswork from property investment. PropCalc estimates the likely costs of owning any investment property and models your cash flow, even before a purchase is made. In this article we will explore: What PropCalc does How PropCalc How investors can benefit from PropCalc What PropCalc does PropCalc can help both prospective and existing residential property investors estimate the cash flow position of any investment property. The calculator estimates the after-tax holding costs and property’s gearing level based on the investor’s financial scenario. PropCalc takes property related tax deductions into consideration and allows investors to compare multiple properties side-by-side to see which would be best suited for their financial situation. Users can access PropCalc through MyBMT, a portal for property management featuring schedules and policies, record keeping, PropCalc and a research and insights portal which displays planning applications and census data, providing a better indication of future capital growth and vacancy rates. How PropCalc works PropCalc uses property-specific data to give a realistic impression of cash flow by calculating the difference between rental income and expenses, including tax deductions available for expenses. Simply enter the address of the property and PropCalc will pre-fill with reliable estimated data which can then be adjusted for various scenarios. The calculator will include deposit, mortgage insurance, stamp duty, legal fees, interest, body corporate fees, insurance, council rates, water rates, property management fees, repairs and maintenance estimates and depreciation. Once the information is filled out a report will be displayed with property images and estimated figures including holding costs, gearing level and rental yield. You can also see the holding costs in a weekly, fortnightly, monthly or yearly period. Once the report is complete you can go back and change any figures if the scenario changes. PropCalc generates property reports, allowing you to save and compare multiple properties online and through the app. How can investors benefit from PropCalc? PropCalc gives users the advantage of knowing their likely out of pocket cash flow position prior to purchase. This information can help them explore property buying options and make informed decisions on whether a property is suitable without any costs or commitment. PropCalc is available as an app so that properties can be compared on-the-go at property inspections. After inspecting the property, users can add images and enter in notes to have them included in the report. Or the report can be downloaded as a PDF and taken when inspecting the property. Over 40,000 people are already enjoying the benefits of PropCalc. Join them by adding this to your investment property tool kit. Download the app on Google Play, or the App Store or visit bmtqs.com.au/propcalc today.

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Benefits of partial year depreciation deductions

BMT team — Sun, 20 Nov 2022 23:00:56 +0000

When property investors are preparing their annual income tax return, it’s important to organise a tax depreciation schedule for any recently purchased properties. Even if you have purchased a property in the lead up to the financial year and only owned it for a short period of time, there are still depreciation benefits. Partial year depreciation deductions can be maximised by your quantity surveyor by applying a pro-rata depreciation calculation, resulting in extra cash for you. In this article we will explore: Partial year depreciation deductions Immediate write-off Low-value pooling Talk to an expert Partial year depreciation deductions Investors can claim pro-rata depreciation deductions for the period their property is rented out or is genuinely available for rent. That is, the property is given broad exposure to potential tenants and considering all the circumstances tenants are reasonably likely to rent the property. This is particularly important for holiday homeowners as the property may only be rented during peak seasons like Christmas and New Year. If you use your holiday property for both private and income-producing purposes, you can only claim a deduction for the period where it is income-producing. Partial year depreciation deductions may also apply to investors who have previously used the property as a primary place of residence. Be sure to speak to your quantity surveyor to ensure you claim correctly. BMT Tax Depreciation use legislative tools to make partial year claims more beneficial to new investment property owners. Methods used in pro-rata depreciation calculations include applying the immediate write-off rule and adding eligible assets to a low-value pool. Immediate write-off An immediate write-off applies to any item within an investment property with a value of less than $300, regardless of how long the property has been owned and rented. As an investor, you’re entitled to write-off the full amount of the asset in the first year. For example, if you purchase a new smoke alarm valued at $50 for your investment property, you can claim 100 per cent of the cost in the year of purchase. Low-value pooling Low-value pooling is a method of depreciating plant and equipment assets which have a value of less than $1,000. Any plant and equipment assets with a value of less than $1,000 can be included in a low-value pool and written off at an accelerated rate to maximise deductions. Item can be depreciated at 18.75 per cent in the first year and 37.5 per cent each year thereafter. This amount can be claimed in full in the relevant financial year regardless of how long the property was held for, even if it was one single day. Two types of depreciable assets can be allocated to a low-value pool: Low cost asset: a depreciable asset that has an opening value of less than $1,000 in the year of acquisition Low value asset: a depreciable asset that has an opening value of greater than $1,000 in the year of acquisition but the value after depreciating over time is now less than $1,000. This will only apply if you’ve previously used the diminishing value method. For example, if you purchase a hot water system worth $1,500 it can be depreciated using the diminishing value method. Once its depreciable value falls beneath $1,000, it will be added to the low value pool as it’s considered a low value asset. On the contrary, if the hot water system cost $900 at the time of purchase it would be automatically added to the pool as a low cost asset. It’s important to note that once an item is placed in a low-value pool, it cannot be taken out. Assets which form part of a group with a total cost exceeding $1,000 can cause confusion for property investors so it’s important to speak to an expert to clarify what can and cannot be claimed in a low-value pool. Talk to an expert To ensure all depreciation deductions are claimed correctly for the period a property is income producing or available for rent, investors should request a tax depreciation schedule. A BMT Tax Depreciation Schedule will outline all qualifying deductions from the date of settlement and include a partial year depreciation claim that is calculated pro-rata based on the time the property is rented.

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