Learn how the experts maximise deductions
Many investors ask the question, ‘Why can’t I just do it myself or ask my Accountant to claim depreciation deductions on my investment property?’
The answer is simple. Quantity Surveyors who specialise in depreciation have the recognised qualifications, skills and specialist knowledge of the depreciation methods available to help property investors maximise their deductions.
The Australian Taxation Office recognise Quantity Surveyors under tax ruling TR/97 with the appropriate knowledge to estimate construction costs for depreciation purposes. However, not all Quantity Surveyors are created equally. A tax depreciation quantity surveying firm, will use their skills to accurately calculate depreciation deductions for investment property owners. This helps to ensure owners can claim maximum returns for the lifetime of ownership.
How do Quantity Surveyors do this?
To demonstrate how the depreciation methods a specialist Quantity Surveyor uses can make a difference to an overall claim, let’s look at immediate write-off and low-value pooling. These are two depreciation methods which assist in accelerating deductions for some plant and equipment assets found in a typical residential property.
An immediate write-off can be applied to any plant and equipment asset which costs $300 or less within the first year of ownership, regardless of how many days the property is owned in that year.
This means the owner can claim the total value of the individual asset within the first financial year, instead of claiming depreciation over the effective life of the asset.
This depreciation method allows some plant and equipment assets to be depreciated at an increased rate, allowing owners to take advantage of deductions sooner.
There are two categories of assets which can be added to a low-value pool:
- Low-cost assets – depreciable assets which have an opening value of less than $1,000 in the year of purchase
- Low-value assets – depreciable assets that have a written down value less than $1,000. That is, the value of the asset was greater than $1,000 in the year of purchase. However, the remaining value after a previous year’s depreciation is less than $1,000
By adding these assets, investors can claim deductions for these items at a rate of 18.75 per cent in the first year of purchase and at a rate of 37.5 per cent from the second year onwards.
It is important to note that once an investor adds items to a low-value pool, they must apply this depreciation method to all assets. Similarly, if an investor chooses not to pool assets, they must continue to claim deductions using either the diminishing value or prime cost depreciation methods.
These rules become even more complicated when a property has more than one owner. A specialist Quantity Surveyor can prepare a split depreciation schedule in a shared ownership scenario which allows each owner to claim the deductions for their portion of interest in each asset. This can mean more assets will qualify to be written off immediately or added to a low-value pool, further maximising the deductions which can be claimed.
These are just two of the depreciation methods a specialist Quantity Surveyor uses to ensure owners can claim maximum returns. Which one you chose depends on your personal investment strategy so it’s always best to contact your Accountant or Financial Adviser to discuss your situation.