Properties that generate income for their owner will make the owner eligible for significant taxation benefits.
Of all the tax deductions available to property investors, depreciation is most often missed because it is a non-cash deduction – the investor does not need to spend money to claim it.
Research shows that 80% of property investors are failing to take full advantage of property depreciation and are missing out on thousands of dollars in their pockets.
As a building gets older, items wear out – they depreciate. The Australian Taxation Office (ATO) allows property owners to claim this depreciation as a tax deduction.
Claiming depreciation on an investment property can make a big difference to an investor’s cash flow.
In order to claim these deductions, we encourage investors to enlist a specialist Quantity Surveyor to complete a tax depreciation schedule. This schedule outlines the deductions available on specific property and is used by the investor’s Accountant when preparing a tax return.
For one investor who had a tax bill from the previous year, the results were significant:
“I just wanted to let you know that our tax bill for last year of $2,600 became a tax cheque of $12,000 just because of the tax depreciation schedule. Thank you,” said Tiana, of Benowa Queensland.
Both new and old properties have the potential to attract significant depreciation benefits for the owner to claim as a tax credit. Property owners are also able to go back and claim missed deductions on previous financial year’s tax returns.
Read more: Claim depreciation on older properties
For an investor experiencing negative cash flow on their property, depreciation can be the key to turning their situation into a more positive scenario.
Another investor who owns a property purchased at $420,000 with a rental income of $490 per week with a total income of $25,480 per annum; had expenses for the property such as interest, rates and management fees totalling to $32,000.
By claiming depreciation, we were able to turn their negative cash flow position into a positive one, saving them $4,255 for the year.
The following scenario shows this investor’s cash flow with and without depreciation.
This investor used property depreciation to turn their negative cash flow position into a positive one. Without depreciation they were paying out $79 per week. By taking advantage of tax legislation and making a depreciation claim, the investor was able to turn their loss to an income of $3 per week. In total, BMT Tax Depreciation saved this investor a total of $4,255 in just one year.
Ensuring that each depreciation claim is maximised on any building requires a combination of construction costing skills and thorough knowledge of current tax depreciation legislation. For this reason, it is recommended that investment property owners consult a specialist Quantity Surveyor to prepare a depreciation schedule prior to lodging their tax return.
BMT Tax Depreciation are accredited with the Australian Institute of Quantity Surveyors (AIQS), The Royal Institute of Chartered Surveyors (RICS) and The Auctioneers & Valuers Association of Australia (AVAA). We pride ourselves on providing prompt and professional service to our clients, which has been mirrored in their feedback.
“This was one of the best customer service experiences ever. From the first call to the inspection and the schedule, everyone was very professional,” said Ken and Maree, of Wangaratta South Victoria.
Call 1300 728 726 for a free estimate of available depreciation deductions or request an estimate for your investment property today.