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Depreciation still the second highest deduction for property investors

Revealed by latest ATO investment property statistics

Depreciation remains the second highest deduction for property investors after interest repayments, according to the Australian Taxation Office (ATO).

ATO investment property statistics recently released from financial year (FY) 2017/18 reveal the average tax deductions claimed for residential rental properties across the country. Costly interest payments continued to be the highest deduction, coming to an average of almost $9,500 for the financial year. Depreciation held second place position in the ranks of total deductions claimed by investors.

Depreciation still the second highest deduction for property investors

Since property depreciation is a non-cash deduction, this makes a significant improvement to an investor’s cash flow because the deduction can be claimed without incurring any additional costs. Meanwhile, interest payments are costly out-of-pocket expenses.

The ATO data revealed that the average plant and equipment claim was $1,357, only a slight decrease from the total of $1,362 reported in the previous financial year. This is promising news, considering the significant legislation changes to plant and equipment depreciation introduced in 2017.

Capital works deductions continued to increase in FY 2017/18. The ATO uncovered an average capital works claim of $2,478. This is slightly more than the previous year’s $2,385.

With both plant and equipment and capital works deductions considered, the total average depreciation deduction found by the ATO came to $3,835.

ATO stats infographic

BMT Tax Depreciation average deductions

We thought we would take a look at the average deductions achieved by BMT Tax Depreciation for residential property owners.

Overall, BMT found a total average depreciation deduction of $8,540 in FY 2017/18. In this financial year, average capital works claim found by BMT was $5,955, and the average plant and equipment claim was $2,585. More recently, BMT found an average depreciation deduction of $8,846 in FY 2018/19 for our clients’ residential properties.

Discover the BMT Difference

For more than 20 years, BMT Tax Depreciation has been the most trusted depreciation specialist in the industry and has completed more than 700,000 tax depreciation schedules.

There are a multitude of ways a specialist will maximise depreciation claims. For example, correct application of legislation, and correctly and accurately valuing assets. A detailed site inspection completed by a specialist site inspector is one of the most important steps.

BMT’s expert staff conduct site inspections to ensure all clients claim maximum deductions while maintaining full ATO compliance. During a site inspection, a specialist BMT site inspector measures the building, notes down the construction type and method, workmanship and materials used. They will also identify any hidden renovations completed by previous owners and note down all these hard to find plant and equipment assets.

Both the National Tax and Accountants’ Association and Australian Institute of Quantity Surveyors support the requirement of site inspections and note the possible risks of missed deductions or errors when a physical site inspection isn’t performed. Missed deductions or errors often result in costly adjustments for investors.

BMT guarantees to find double the fee in deductions in the first full financial year claim or they won’t charge for their services. To start maximising depreciation deductions, contact BMT on 1300 728 726 or Request a Quote.