What is a tax depreciation schedule, and how can it benefit me?
Any owner of an income-producing investment property is eligible for significant taxation benefits. Despite this fact, according to the Chief Executive Officer of BMT Tax Depreciation, Bradley Beer, 80 per cent of property investors are failing to take advantage of property depreciation and are therefore missing out on thousands of dollars in their pockets.
“Property investors often assume they are ineligible or that it is not worthwhile to claim depreciation because they believe their property is too old or they have not owned the property long enough. The reality is, it is worthwhile making a claim on any property,” said Bradley.
“On average, most investors can claim between $5,000 and $10,000 in deductions in the first full year for any residential investment property”
Requesting a tax depreciation schedule which outlines what claims are available for a property owner can make a significant difference. For many investors, depreciation can be the difference between a property which has a negative cash flow and turning the property into a positively geared asset.
“On average, most investors can claim between $5,000 and $10,000 in deductions in the first full year for any residential investment property,” says Bradley.
This is no small amount, so for any investors wondering what property depreciation is, why to claim it, and how to go about making a claim, the following points will answer some of the most common questions asked by property investors.
1. What is depreciation?
Depreciation is a non-cash deduction the Australian Taxation Office (ATO) allows the owner or owners of an investment property to claim a deduction due to the wear and tear of a building structure (capital works deduction) and its fixtures (plant and equipment depreciation) over time. Depreciation is described as a non-cash deduction, meaning the investor does not need to spend any money to be able to claim it.
2. No property is too old
An investment property does not need to be new to be able to claim depreciation. Though ATO legislation states that owners cannot claim capital works deductions for any residential property in which construction commenced prior to the 15th of September 1987, there are no date restrictions for a claim for the depreciation of plant and equipment assets contained within the property. On average, 15 per cent of the total construction cost of a residential property is made up of plant and equipment, so it is always worth making an enquiry.
If a property owner has not been claiming depreciation or maximising their deductions, the previous two years tax returns can also be adjusted and amended.
3. Deductions are available for forty years
The ATO has determined that any building eligible to claim the building write-off allowance has a maximum effective life of forty years. Therefore, investors can generally claim up to forty years depreciation on a brand new building, whereas the balance of the forty year period from the construction date is claimable on an older property.
4. Claim depreciation for renovations
When renovation work has been completed to a property or is in the planning stages, it is essential to contact a specialist Quantity Surveyor and request a site inspection of the property. Additional deductions may be available for any capital improvements done to a property.
Often when renovations have been completed by a previous owner of the property, the additions may not be obvious. A site inspection of the property will allow a Quantity Surveyor to discover any work that has been completed, including non-visible assets like plumbing, waterproofing and electrical wiring. The Quantity Surveyor will then estimate the deductions available from any assets or structural additions that have been made within the qualifying dates and calculate the depreciation accordingly.
If an owner is planning on doing any renovation work to their property, an inspection should be performed both before and after the renovation work is complete. The owner may be entitled to claim additional deductions for any remaining depreciable value of assets or structures removed from the property and written off in the year the items are removed.
5. Use a qualified professional
Quantity Surveyors are qualified under the tax ruling 97/25 to estimate construction costs for depreciation purposes and are one of a few select professionals who specialise in providing depreciation schedules. They are affiliated with industry regulating bodies and gain access to the latest information and resources through their accreditations.
BMT Tax Depreciation is an accredited member of the Australian Institute of Quantity Surveyors (AIQS), The Royal Institute of Chartered Surveyors (RICS) and The Auctioneers & Valuers Association of Australia (AVAA).
Why we chose to partner with BMT
We conducted an extensive search to find the best provider to potentially save you thousands on your tax bill. Here’re a few reasons why we chose to partner with BMT.
- BMT are Quantity Surveys, who specialise in maximising tax depreciation deductions for their clients
- BMT offer a simple guarantee: Double our fee or its free – if BMT can’t obtain at least double their fee in deductions in the first full financial year, there will be no charge for their services
- BMT Tax Depreciation only use their own staff, so if an audit takes place, and the ATO questions the report, you know who will be answering them
- BMT will work with your accountant to get the best depreciation deductions available. If you’re not sure of what you are claiming BMT can contact your accountant to discuss the situation and see if it can be improved, or contact you and review your current claim based on your tax return
- BMT offer a guaranteed turn-around time of 7-10 days post site inspection
- BMT Tax Depreciation gathers all information from councils and relevant authorities – which takes the work out of it for you, making the process as easy as possible