Around this time of year, The Australian Taxation Office (ATO) ramps up client compliance monitoring by writing to property investors who have purchased an investment property.
From my experience the ATO tends to target the following areas:
1. Whether property investors are claiming repairs and maintenance correctly. For example, are they immediate deductions or should the costs be spread out over time?
2. Are the deductions being claimed, based upon an income-producing asset? For instance, if you make a repair to an oven while living in the property then move out two months later, you can’t claim that as a repair!
3. Are property investors claiming the correct building allowance and depreciation deductions? This is the most common area of concern in my opinion, and some of the glaring mistakes I have seen include:
· Claiming the building depreciation allowance based on the purchase price NOT the original construction cost
· Incorrectly classifying items of plant and equipment when they should be part of the construction cost.
With property deductions the flavour of the month at the moment, be safe and get a Quantity Surveyor such as Washington Brown to prepare your depreciation report and hand it to a qualified accountant come tax time.
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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.
