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.
- 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
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 2020 you can still claim depreciation deductions for the 2019/20 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.
BMT specialise in preparing comprehensive tax depreciations schedules for your personal situation. BMT ensure that nothing is missed and that the highest level of compliance is maintained. To learn more about depreciation and the services that BMT offer, Request a Quote or contact the team on 1300 728 726.