The numbers are in, with a Washington Brown analysis finding more than 82% of investment properties do not require a physical inspection for a depreciation schedule to be drawn up that will allow investors to claim the maximum allowable tax deductions.
The depreciation expert assessed 15,370 individual investment properties in Sydney over the past year since the pandemic and found 12,698 - or 82.6% - of properties did not require a physical inspection to achieve the maximum depreciation.
Washington Brown CEO Tyron Hyde said in the old days every property had to be physically inspected so depreciation experts could value both the building and plant and equipment items, such as dishwashers and ovens, individually, but that was the way of the past.
“Law changes in 2017 were the catalyst for change, with property investors now unable to claim depreciation on plant and equipment items that aren’t brand new,” he said.
“Now, for second-hand properties, you can only claim depreciation on the structure of the building, such as concrete and bricks, unless you have renovated.
“If you buy brand new items like carpet and blinds, you can still claim depreciation but it must be based upon the purchase price rather than an estimate, so you can provide these figures to a depreciation expert, without an inspection being necessary.
“Since depreciation can only be claimed on the structure of the building for second-hand properties, it’s very likely records already exist from previous depreciation inspections, and this is another reason why a physical inspection is likely not needed.
“In 40 years we have amassed an extensive database of construction costs for the majority of residential and commercial buildings around Australia.
“As an example, Washington Brown works with the Meriton Suites World Tower apartments in Sydney; we have been there over 500 times for inspections and have the original costs, plans and specifications.
“Nothing has changed to the structure of the building so there is no point in inspecting it again, and there is no point in paying someone to do so.
“It’s the same scenario for thousands of unit blocks we’ve been involved with.”
Mr Hyde said around 17.4% of properties still required an inspection, such as luxury homes, but as a general rule stock-standard apartments in a block of hundreds would not need to be inspected.
“At Washington Brown we analyse each property before recommending a course of action and determining what is best for each client, rather than saying every property has to have an inspection, which is what some quantity surveyors do,” he said.
“If an investor is being told every property must have an inspection, be aware that’s not the truth - the quantity surveyor will be acting in their own best interests, rather than yours.
“The numbers don’t lie. The facts show we don’t need to physically inspect every property in order for the maximum tax deductions to be claimed. In fact, the truth is that the vast majority don’t need a physical inspection.
The benefits of not having a physical depreciation inspection is that you will save both money and time, said Mr Hyde.
“If your property doesn’t need a physical inspection for a depreciation schedule, the good news is that you will save up to $300.
“Not only will it be cheaper, but you’ll also receive the report faster.
It also means you can have a ‘contactless’ report, with no one coming into your property and bothering your tenants, which is a big benefit during COVID – particularly during a lockdown like we are experiencing now.”
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Tyron Hyde is the CEO of Washington Brown and is considered one of Australia’s leading experts in property tax depreciation. He is also a registered tax agent. Washington Brown manages construction costs worth over $2 billion and completes 10,000 schedules annually. For a depreciation schedule quote CLICK HERE and follow the 3 simple steps or estimate your depreciation cost.
The Washington Brown Free Depreciation Calculator will give you an estimate of the depreciation deductions you could claim on your investment property
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Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
