Claiming depreciation on your property is one of the most important steps in an investor’s journey. And it’s the only deduction that can be subjective.
All other expenses – such as interest, strata fees, etc. must equal the amount you have precisely paid out.
But, having an expert prepare your depreciation report can enhance your claim. So, here are my Top 5 Tax Depreciation tips to take full advantage of the return on your investment property.
Tip 1 - Buy property built after 1987
When the recent depreciation laws changed - only properties built after 1987 are worth depreciating, unless they have had significant renovations.
That is because you can no longer depreciate the plant and equipment moving forward, only the capital works allowance for second-hand properties.
So look for properties built after this date if you want to claim depreciation.
Tip 2 - Not all properties now need an inspection
Use a quantity surveyor that assesses your property to see whether your property actually needs an inspection.
The depreciation laws changed in 2017 and this means not all property now needs a property depreciation inspection.
Some of course do, but not all. So don’t overpay unnecessarily.
Tip 3 - Use a property depreciation calculator
Property investors can get an estimate of the likely tax depreciation deductions on a property before they buy it.
So you, as an investor, can use our website, free of charge, and compare apples with oranges and see what works best for you.
For example, you might be considering buying a 5-year-old property but are concerned the depreciation deductions won’t be as high as a brand new property.
Our property depreciation calculator estimates instantly what the difference will be.
This calculator uses real-life data collated from every inspection we do on behalf of our clients.
So the data gets more accurate with time.
Tip 4 - Furnish your property
Furnishing your property is another way to increase your depreciation deductions as it attracts higher depreciation rates.
For example, we have calculated that a $20,000 furniture package supplied by a developer can result in an additional $10,000 deduction in the first year alone.
In addition to your other depreciation opportunities, furniture really can enhance your overall claim.
But remember that furnishing your investment isn’t necessarily the best option for all properties and locations.
It’s better suited to smaller one or two-bedroom apartments in transient areas that attract short-term tenants and holiday rentals.
Tip 5 - Experience counts
For starters – let’s put this issue in perspective… you have just paid hundreds of thousands of dollars for a property – do you really want to save a couple of hundred tax-deductible dollars on the ONLY tax break available to you that can be open to interpretation and skill?
The laws have changed frequently over the years and each building is unique, so it pays to get expert advice.
I suggest you engage a firm that has been around for at least 10 years. They will have the necessary experience to analyse your property correctly.
The ATO has identified Quantity Surveyors as appropriately qualified to estimate the original construction costs in cases where that figure is unknown.
Please note – your accountant, real estate agent, and property valuer are not qualified to make this assessment in accordance with the ATO.
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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.
Read more Expert Advice articles by Tyron
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
