With tax time fast approaching it’s essential investors understand the importance of property depreciation and its financial benefits.
What is property depreciation?
- Depreciation is the natural wear and tear that occurs to a building and the assets within it over time.
Why you need a tax depreciation schedule
- Any property which generates income may be eligible for thousands of dollars in depreciation deductions. A BMT Tax Depreciation Schedule ensures investors don’t miss out on the hidden cash flow available for their properties.
What sets BMT Tax Depreciation Schedules apart
- BMT is the largest and most successful tax depreciation company in Australia. During the 2017/2018 financial year, we found residential property investors an average first year deduction of $8,212
- Tax Ruling 97/25 states Quantity Surveyors such as BMT Tax Depreciation are one of the only professions qualified to estimate construction costs for depreciation
- Our schedules last for the forty-year life of an investment property
- BMT Tax Depreciation Schedule fees can be claimed in your tax return.
Claiming property depreciation
- A BMT Tax Depreciation Schedule includes a detailed outline of two major components – capital works deductions (division 43) and plant and equipment assets (division 40)
- Capital works allowance refers to the tax deductions for the building’s structure and items considered to be permanently fixed to the property. Plant and equipment assets refer to items which can be easily removed from the property.
What is deductible under capital works allowance?
- Capital works allowance or ‘building write-off’ is a deduction available for the structure of the building and items such as sinks, baths, built-in kitchen cupboards, clothes lines and doors
- Generally, residential properties in which construction commenced after 15th September 1987 can claim capital works deductions at 2.5 per cent for forty years
- Commercial properties in which construction commenced after 20th July 1982 are also eligible, though the deductions will vary based on the type, age and historical construction cost of the property.
What are plant and equipment assets?
- Plant and equipment assets refer to items that can be easily removed from the property or are mechanical in nature such as hot water systems, ovens, carpet and blinds
- Deductions for plant and equipment assets are based on the condition and quality of each individual asset
- Under current legislation, owners of second-hand residential properties who exchanged contracts after 7:30pm on 9th May 2017 cannot claim deductions for previously used plant or equipment assets. Owners are still eligible to claim for any brand-new plant or equipment assets they add to the property
- It’s important to note that investors who purchase brand-new residential and substantially renovated properties, commercial real estate or add new plant and equipment assets to a second-hand residential property can still claim substantial depreciation deductions.
Visit BMT to enquire about the possible depreciation deductions available on a current or potential investment property.
The difference between repairs and improvements
- Deductible repair: returning items or property to their original state to retain their value. Repairs attract an immediate 100 per cent deduction in the year of expense
- Improvement: improving the condition of an item or property beyond that of when it was purchased. Improvements are capital in nature and as such, must be depreciated over time.
For a free assessment of likely depreciation deductions, contact BMT Tax Depreciation today on 1300 728 726.