Local rental rates, market demand, unemployment, wage growth and other economic conditions can affect the return from your investment property.
A common trait held by successful property investors is their ability to maximise cash flow during both the peaks and troughs of the market. One way they do this is by always claiming maximum depreciation deductions from their properties.
In this article we will look at:
- What is rental property depreciation?
- Why do you need a depreciation schedule for a rental property?
- Do all investors need a rental property depreciation schedule?
- What does a depreciation schedule for a rental property include?
- How to organise a depreciation schedule for a rental property
What is rental property depreciation?
Rental property depreciation is the natural wear and tear of a building and its fixtures and fittings over time. As a property investor, you can claim depreciation as a tax deduction each financial year.
One little-known fact about depreciation is that it’s a non-cash deduction. This means that you don’t need to spend any money in order to claim it. Despite this, many investors don’t claim rental property depreciation because they don’t know how or aren’t aware of the benefits.
Why do you need a depreciation schedule for a rental property?
If you’re thinking that you can go to your accountant and they will automatically determine your depreciation deductions, this is not the case.
A tax depreciation schedule completed by a specialist quantity surveyor is an essential step to claiming depreciation. Your accountant then uses this to determine your depreciation deductions each financial year.
Do all investors need a rental property depreciation schedule?
Essentially, if an investor wants to claim depreciation they must have a tax depreciation schedule completed prior to the claim. This includes single owners and split owners.
What does a depreciation schedule for a rental property include?
A tax depreciation schedule holds everything you need to claim depreciation for the life time of your property (forty years). Some key features of a BMT Tax Depreciation Schedule includes:
Breakdown of both plant and equipment and capital works deductions
It’s always good to see what deductions are available in the future. A BMT Tax Depreciation Schedule provides multiple forecasts to ensure you know how much money you can get back in your pocket each financial year.
Diminishing value and prime cost deductions
Plant and equipment deductions can be claimed using either the diminishing value or prime cost methods of depreciation.
Once a method of depreciation is chosen, it can’t be changed. A schedule provides an overview of the deductions using both methods and your accountant can help you choose the best method for your investment strategy.
Plant and equipment assets that are eligible for the low-value pool can be depreciated at an accelerated rate. The specialist BMT team identifies every qualifying asset for the low-value pool and includes these in pooling schedules.
Designed for accountant software and ATO MyTax
BMT works closely with accountants to make sure that claiming depreciation is both beneficial and easy. A BMT Tax Depreciation Schedule is designed to seamlessly integrate with accounting software and the Australian Taxation Office MyTax portal.
Easy to amend
Property is a tangible asset, therefore changes and improvements can be made over time through renovations and repairs.
If you’ve made an improvement to your investment property, you don’t need to have an entirely new schedule completed. BMT can easily update your current schedule to include any new additions at a small, tax deductible fee.
How to organise a depreciation schedule for a rental property
The first step is to enlist a specialist quantity surveyor, such as BMT Tax Depreciation.
BMT can provide an obligation-free estimate of likely deductions. If you wish to proceed with having the schedule completed, a specialist BMT site inspector will come to your property to complete a comprehensive site inspection.
The site inspection is a significant step. Doing so ensures that nothing is missed, and any deduction determined from the schedule is compliant.
Both the Australian Institute of Quantity Surveyors and the National Tax and Accountants’ Association support the requirement for physical site inspections and note that costly errors can be made when they are not completed.
To learn more about what a depreciation schedule is for a rental property, Request a Quote or contact BMT on 1300 728 726.