As a property investor, depreciation deductions can make a big difference to your cashflow. The Australian Tax Office (ATO) allows property owners to claim depreciation on their property as a deduction. Unfortunately, it is common for depreciation to be missed by property owners as it is a non-cash deduction.
However, because it is a non-cash deduction, it can have an immense tax benefit when it comes time to lodge your tax return without the need to sink more cash into your property.
If you have an investment property, and you are not claiming depreciation in your tax return, you need to check if you are missing out on a potentially significant claim.
What can be claimed?
Generally, you can claim depreciation deductions relating to your income-producing property’s structure. You can also claim deductions on plant and equipment, or fixtures and fittings within your investment property. This included items like hot water systems, carpets, blinds and more.
Generally, newer properties with newer fixtures and more expensive construction costs or substantially renovated properties will be able to attract more depreciation deductions simply because they have not depreciated in value as much as older or unrenovated properties. That does not mean it’s not worth investigating depreciation options for older or unrenovated properties. It always pays to check with your accountant and a qualified quantity surveyor.
Recently there have been some changes to the rules around depreciation for newly acquired, existing properties which restricted depreciation deductions for plant and equipment items in an existing house (Air conditioners for example). Even allowing for these new rules, it’s still worth asking your accountant and a qualified quantity surveyor about the possibility of claiming a depreciation deduction for your property.
How to claim
To maximise your investment property depreciation deductions, you should engage a specialised quantity surveyor to complete a tax depreciation schedule for you. This has a one-off cost, which is fully tax deductible and will last the entire life of your property investment. This schedule will ensure that you and your accountant claim the maximum depreciation deductions you are entitled to.
Our recommended Quantity Surveyors are BMT Tax Depreciation (https://www.bmtqs.com.au/) and Deppro (https://deppro.com.au/). If you don’t already have a tax depreciation schedule for your investment property, reach out to one of these providers. They will let you know if it is worthwhile getting the report. Very often the report will more than pay for itself in the first year.
If you need advice around the deductions available to property investors, including depreciation deductions, get in touch with the Link Advisors team.