Depreciation deductions add up in the heart of a home

BMT team — Thu, 12 Nov 2015 04:03:21 +0000

They say that a kitchen is the heart of a home and this couldn’t be truer than when a property is used for investment purposes. For tenants the kitchen may be a hub where the whole family comes together at the end of each day, but for landlords this part of a property has even more importance. This is because the items contained within the kitchen of an investment property not only influence current rental returns received and potentially play a role in future capital growth, they also contain many of the most valuable depreciable items an owner can claim deductions for. Owners of income producing residential properties are entitled to claim capital works deductions for any of the structural items that commenced construction after the 15th of September 1987. They are also entitled to claim depreciation for any plant and equipment asset using their individual effective life as legislated and enforced by the Australian Taxation Office (ATO). The kitchen in any residential investment property contains a significant number of depreciable items an investor can claim. Examples of structural items eligible for capital works deductions include the kitchen cupboards, bench tops, sinks, the pantry and tiled floors. Common plant and equipment assets found in a kitchen include dishwashers, ovens, cook tops, range hoods, microwave ovens, light fittings, refrigerators, floating floors and garbage disposal units. To examine the depreciation deductions a property investor can claim in the first financial year within the kitchen of an investment property, let’s take a look at the following graphic. In total, depreciation deductions in the first financial year for items found in the above kitchen amount to $2,496. This is a significant amount which an investor can claim to help reduce their annual income tax. Structural items found in the picture such as kitchen cupboards, benches and tap ware will be claimed as capital works deductions at a rate of 2.5 per cent per year over forty years. So while assets such as taps and sinks will only see a first year claim of $5 and $12 respectively, over forty years these items will entitle the owner to a total of $680 worth in depreciation deductions. With a first financial year deduction of $560, kitchen cupboards and bench tops will equate to a total $22,400 in deductions over forty years. While a number of the plant and equipment assets found in the above kitchen (for example the coffee machine, the knife block and the microwave) have a depreciable value of less than $300, these items will entitle their owner to claim their full value in the first financial year. This is because legislation allows rental property owners to claim an immediate write-off for any asset worth less than $300 in the year of the items acquisition. To ensure that the maximum depreciation deductions are claimed for any investment property, it is recommended that rental property owners seek the advice of a specialist Quantity Surveyor. They will complete a comprehensive tax depreciation schedule which includes a full site inspection of the property to ensure no deductions are missed. During the site inspection, a specialist Quantity Surveyor will take measurements and photograph every depreciable asset found in the property. They will also look for less obvious renovations which may have been completed by a previous owner of the property. Kitchens are popular rooms to renovate, however work that has been completed is not always obvious. Previous renovations can be easily missed without seeking expert advice, for example new plumbing and electrical wiring. Quantity Surveyors will also do the relevant searches necessary and consult with industry bodies such as councils to gather the information required to produce a depreciation schedule. Once a comprehensive depreciation schedule has been completed, an investor can use the information outlined in the report to claim the deductions available with their Accountant when they complete their annual income tax assessment. The deductions in a property add up and can have a significant impact on improving an investor’s annual cash flow. Complete the form for an estimate of likely depreciation deductions for any residential investment property or call 1300 728 726 today. This article was first seen on Sourceable.net and you can view the article at sourceable.net/kitchen-depreciation-deductions-add-up/

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My kitchen’s depreciation rules

BMT team — Thu, 23 Apr 2015 07:34:28 +0000

As MKR’s British boys turn the heat up on the competition with 2 perfect and 3 near perfect dishes, investors can get a perfect score when claiming depreciation, by ensuring they claim everything they can. While contestants on the reality TV show vie for $250,000 prize money, investors themselves are able to claim their share of the “prize” when it comes to the kitchen in their investment property. The cabinets, benches, sinks, splashback, kickboards, electrical fittings, door and handles are eligible for the capital works deduction which allows owners of investment properties built after the 16th of September 1987 to claim capital works at a rate of 2.5% over forty years from construction completion. Realistically kitchens are generally replaced more often so it is fair to say that most kitchens will be entitled to this component of a depreciation claim. In addition to the above items, various items of plant and equipment are generally found in a kitchen and form part of an investment property. These items include: Oven Cook top Rangehood Dishwasher Taps Lights Flooring Window furnishings Refrigerators Microwave ovens Coffee machines Knife block These items are eligible to be depreciated at various rates of effective lives determined by the Australian Taxation Office. Some of these items will be eligible to be categorised into the low value pool in the first year claim, boosting the deductions for the investor. A low value pool is for items that have an opening value of less than $1000 and assets that depreciate to be less than $1000 and legislation allows for them to be written off at a much faster rate. Learn more: Depreciation deductions add up in the heart of the home Whilst the deductions available from the above assets may not be the $250,000 prize money the MKR contestants are competing for, investors can make certain that depreciation from the rest of the property is maximised to ensure they don’t miss out on their share of the depreciation prize pool.

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Depreciation deductions add up in the heart of a home

My kitchen’s depreciation rules